Walking in different shoes
“Before you abuse, criticise, and accuse
Walk a mile in my shoes”
Joe South’s 1969 song Walk A Mile In My Shoes, later covered by Elvis Presley, might not stand out as an obvious musical embodiment of pensions.
But its underlying message – that we need to understand an individual’s circumstances before we judge them – has more resonance than you might think. Existing pension savings, personal circumstances, ability to contribute and willingness to do so will all have an effect on individuals’ long-term prospects. Acknowledging those unique circumstances rather than assuming a one-size-fits-all approach to pensions can help everyone to make the most of their retirement prospects.
No matter what the size or shape of their shoes, equipping employees to answer the questions ‘how much do I need for retirement?’ and ‘what can I do to achieve that?’ should be a universal goal for all employers and their pension schemes.
With as many as six different generations now active in the workplace, staff will have vastly different experiences and expectations of pensions. Older workers may have spent most of their life in a defined benefit (DB) scheme, whereas new recruits are likely to be auto-enrolled into a defined contribution (DC) scheme. In between, employees in their thirties, forties or fifties might have any number of pensions from different jobs including DB, legacy stakeholder schemes, group personal pensions, master trusts and more. With such different and fragmentary arrangements, it’s no surprise that many employees do not know whether they are on track for an adequate retirement.
And while it might be ideal to imagine that everyone’s life follows a smooth, straight road where they leave school at 18, marry at around 30, have two children, follow a linear career path, then opt to retire at 65, the reality is often very different. Employees will have a kaleidoscope of different experiences, life stages and ongoing obligations that will affect their ability to save for retirement.
Inflation is currently outstripping wage growth, putting even more pressure on household incomes. Even if employees would like to save more, they may not be able to do so in the short term.
But the fact remains that we all need to make financial arrangements for life after work. Individuals are being expected to take more responsibility than ever before for their pension savings and how they choose to spend that money after the age of 55. Employers can play a significant role in supporting them:
In any company, individuals will have any variety of different backgrounds and financial prospects. Lead the way in good pension scheme design, communications and member advice to help as many employees as possible confidently walk the mile to retirement.
Author Sophia Singleton is the Partner and Head of DC Consulting. To find out more about Aon’s 2016 DC Member Survey, click here