Supporting Retirement: The Growing Concern for UK Businesses
As the UK population ages and retirement trends evolve, concerns are mounting about whether businesses are doing enough to support their employees in preparing for retirement. This issue is multifaceted, involving not just the financial aspects but also the broader societal and economic implications.
The Average Retirement Age: A Shifting Landscape
The average retirement age in the UK has been on the rise, currently standing at 64.6 years, with men typically retiring at 65.1 years and women at 64 years. This shift is partly attributed to the COVID-19 pandemic, which has led to increased flexible working arrangements, enabling older workers to remain in the workforce longer. However, this trend also highlights the need for more robust retirement planning.
Regional Variations and Gender Disparities
Retirement ages vary significantly across different regions in the UK. For instance, 19 per cent of individuals in the South West of England continue working beyond 70, in contrast to only 10 per cent in the North East. These regional differences are often linked to the cost of living and local economic conditions.
Additionally, there are notable gender disparities. Women generally retire earlier than men but live longer, which means they require larger pension pots to maintain their standard of living in retirement. Despite this, women typically have smaller pension savings, exacerbating the financial insecurity they may face in their later years.
The Knowledge Gap in Pensions
A critical issue is the widespread lack of understanding about pensions among the UK population. A recent Aviva study revealed that while 53 per cent of Brits claim to be knowledgeable about pensions, only a third can correctly identify the difference between Defined Benefit and Defined Contribution pension schemes. This knowledge gap underscores the need for better education and support from employers to help employees make informed decisions about their retirement savings.
The Underpensioned: A Growing Concern
Millions of people in the UK are reaching retirement age with significantly inadequate private pension incomes. According to the 2025 Underpensioned Report by now pensions, underpensioned groups, including carers, people from ethnic minority backgrounds, those with disabilities, women, divorced women, single mothers, self-employed individuals, and multiple jobholders, often have annual private pension incomes ranging from £3,650 to £6,750. This is substantially lower than the population average of £8,500, leaving these individuals vulnerable to financial insecurity in retirement.
The Role of Auto Enrolment
Since its introduction in 2012, auto enrolment has been a significant step forward in encouraging workplace pension savings, bringing over 11 million additional people into workplace pension schemes. However, many in underpensioned groups do not meet the eligibility criteria for auto enrolment and thus miss out on the opportunity to save for their retirement. This highlights the ongoing challenge and the need for further reforms to ensure all workers have access to pension savings opportunities.
What Businesses Can Do
Given these challenges, it is imperative for businesses to take a proactive role in supporting their employees’ retirement planning. Here are some steps that can be taken
Educational Workshops
Organise regular workshops and seminars to educate employees about different types of pension schemes, the importance of early savings, and how to manage retirement funds effectively.
Customised Pension Plans
Offer tailored pension plans that cater to the diverse needs of the workforce, including flexible contribution options and additional support for underpensioned groups.
Financial Advice
Provide access to independent financial advisors who can offer personalised advice on retirement planning.
Flexible Working Arrangements
Continue to support flexible working arrangements that allow older workers to balance work and retirement, thereby extending their working lives if desired.
Inclusive Policies
Implement policies that ensure all employees, including those in underpensioned groups, have equal opportunities to save for their retirement.
Conclusion
Supporting retirement is not just a moral obligation but also a strategic move for businesses. By investing in their employees’ future, businesses can foster a more loyal and productive workforce. As the retirement landscape continues to evolve, it is crucial for employers to stay ahead of the curve, addressing the knowledge gaps, regional disparities, and financial insecurities that many face.
At Cutts and Co Accountancy, we understand the complexities of retirement planning and are committed to helping our clients and their employees prepare for a secure financial future. Whether through providing expert financial advice, assisting with pension scheme administration, or offering guidance on auto enrolment, we are here to support you every step of the way.
