When it comes to retirement, what on the surface may seem like a straightforward financial milestone can in fact be a complex challenge, especially when the legislative landscape shifts (as it not infrequently tends to do). With new tax implications for pensions and a widening advice gap, employers have a critical role to play in helping their people retire with confidence, dignity, and clarity.
The new reality of retirement planning
The inclusion of pensions in IHT calculations marks a fundamental shift. For decades, pensions were seen as a tax-efficient way to save for retirement and pass on wealth outside the confines of an individual’s estate. But with this change, families could face 40% tax on pension assets above the IHT nil-rate band, which is a potential blow to those who’ve saved diligently.
This change comes at a time when retirement is already one of the most stressful life events. According to the Holmes and Rahe stress scale3, retirement ranks 10th, just behind events like being fired or marital separation. And with the growing pension advice gap, where only approximately 3 in 10 people seek regulated advice when accessing their pension2, many are navigating this complex transition without proper support.
Why employers should look to step in
We believe employers are perfectly placed to support their people through this transition. Our Approaching Retirement Support service is designed to help your people make informed decisions, financially and emotionally, as they near retirement.
Here’s why it matters:
1. Protecting your EVP and talent pipeline
Supporting retirement isn’t just about helping people leave but about helping them leave well. This can help strengthen your Employee Value Proposition (EVP) and retain top talent across all age groups. Younger employees may also question their future if they see senior colleagues unable to retire, potentially stalling their own career progression.
2. Preserving the value of pension investments
Auto-enrolment has led to large pension accumulations, but converting these pots into sustainable retirement income requires complex decisions. Employers who offer structured support help employees avoid costly mistakes and maximise the value of both employer and employee contributions.
3. Controlling rising benefit costs
Older employees who have to delay retirement may cause increased claims on health benefits, driving up premiums. Based on an example quote provided by a leading insurer (hospital list: consultant select), the difference in annual PMI premiums between a 60-year-old and a 45-year-old can exceed £1,300 per employee. Multiply that across your workforce, and the cost of not supporting retirement becomes clear.
4. Boosting productivity and wellbeing
Retirement-related stress contributes to both absenteeism and presenteeism, costing UK businesses over £100 billion annually4. Employees working beyond their ideal retirement age may experience reduced engagement, lower productivity, and increased illness — all of which impact business performance.
5. Holistic support: Beyond financial advice
Retirement isn’t just a financial event it’s an emotional and psychological transition. Around 50% of people fear losing identity and purpose after retiring5, which is why we tell our clients about the importance of retirement coaching to help individuals redefine their post-career life, manage time, rebuild social connections, and maintain wellbeing.
What employers can do now
It’s never too early to prepare for these changes – in fact, the earlier you do so, the better. To make sure your people are informed and effectively supported, consider:
- Offering access to regulated financial advice
- Providing retirement coaching and emotional support
- Educating employees on pension consolidation and drawdown strategies
- Keeping employees informed of legislative changes
- Encouraging succession and legacy planning
Investing in structured retirement support can help employers like you demonstrate care for your people while managing long-term costs and risk, and providing access to impartial, FCA-regulated advice can help ensure employees understand how inheritance tax may affect their pension and estate planning. Complementing this with workshops or digital tools can help demystify complex topics such as tax wrappers, drawdown options, and intergenerational wealth transfer.
Equally important is emotional preparation. Retirement coaching is designed to help employees plan for life beyond work by easing anxiety and enabling smoother transitions. Regular communication (whether through webinars, internal newsletters, or one-to-one sessions) can reinforce trust and transparency. By integrating retirement planning into wider wellbeing and benefits strategies, employers can turn a potential inheritance tax ‘trap’ into an opportunity to strengthen financial resilience across their employees.
Final thoughts
The inclusion of pensions in inheritance tax marks a pivotal shift in retirement planning. Employers that act now - by offering advice, education, and emotional support — will not only protect their people’s financial wellbeing but also enhance loyalty, productivity, and organisational health in the years ahead.
