‘Cliff Edge’ retirement unpopular with majority of today’s workers

Tips from our experts on enjoying a phased retirement

A recent survey* has found that half of over 50s shunned the traditional ‘cliff edge’ retirement, preferring to ease themselves in with a ‘phased’ approach.  This could mean drawing down some pension income to allow part-time working without compromising on total income.  

The appeal of a transitional approach allows workers to adjust the amount of time they work before giving up work entirely.  For example, if you can afford to retire age 65, then phased retirement might mean you can reduce your working hours from age 62 and stop work altogether at age 68.

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There are many pros of a phased retirement but also some cons to consider.  Our experts have detailed these below to help workers think about how they might like to take their retirement.

PROS:

      • INCOME ADJUSTMENT - most people will have a lower income in retirement than they do through their working life. Phased retirement can provide a middle ground that helps them to adjust gradually to living on a tighter budget and transition from building their savings and pension assets to living off what they have. This requires a sharp change of mindset for those who retire ‘cliff edge’.

      • EARLY RETIREMENT - if you could ordinarily afford to retire age 65 then phased retirement might mean you can reduce your working hours from an earlier age and stop work altogether later on.  Plus, some people actually like their jobs!

      • ACTIVE MIND – besides the financial changes, retirement involves a significant lifestyle shift. Some people can quite happily fill seven days a week with leisure activities.  However, many like to have some structure to their week, enjoy interacting with their colleagues. Working a lighter schedule can extend the number of years an individual can continue to work for.

      • FINANCIAL BENEFITS - if in good health workers are more likely to stay in employment longer which brings financial benefits as well as more time for leisure activities.  This means workers get the best of both worlds, benefitting mentally and socially from work, as well as continuing to receive an income and enjoying more leisure time.

      • GROW INCOME - continue to grow your retirement income, while enjoying the extra flexibility of a shorter week. Employer and personal pension contributions can continue AND you delay or reduce the need to access your existing pension savings.

      • PRESERVE CHILDREN’S INHERITANCE - by working part-time and delaying pension withdrawals or reducing what you’d need to withdraw if you retired completely, you preserve more of your pension pot.  This maximises the death benefits of a pension, providing an opportunity to pass more of your money to children/beneficiaries free of inheritance tax. 

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CONS:

      • TAX MAN – receiving pension income and income from employment could result in paying income tax at a higher rate.

      • MORE WORK LESS PLAY - continuing to work reduces the amount of time spent enjoying holidays and leisure activities whilst still in good enough health to do so.

      • MONEY PURCHASE ALLOWANCE – the money purchase annual allowance reduces an individual’s yearly pension contribution allowance from £40,000 (or 100% of salary) to just £4,000 in the tax year. It applies when you begin taking money out of your pension as a flexible income. You can do this when you reach 55.

        If the pension benefits are accessed flexibly, which is common in phased retirement, this reduces the amount that can be put into the pension. This will limit the scope you have to save for retirement and can even result in a tax charge if contributions exceed the limit – contributions from your employer count towards the limit.

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The Pension Freedoms have provided workers with more options in terms of how they access pension benefits. As a result, there are significant tax planning opportunities for those considering phased retirement which can help to mitigate the potential negative tax implications.

Lemonade’s Retirement Options Planner allows workers to input their pension information, so they can easily compare their three options (drawdown, annuity & cash out).  This clever tool also helps them to understand when they can afford to retire which can help with their decision on how best to take their retirement.

 

* Source:  Research conducted by Aegon in conjunction with Opinium, based on responses from 1007 UK workers aged 50+ earning £20k+ between 30 November and 6 December 2018.





Financial Wellbeing - Intrusive or valuable?

Recent research* has found that 45% of employers believe they are intruding into their employees lives by offering financial wellbeing. Eight out of 10 said they don’t know the difference between financial advice and financial guidance.  


There is still some scepticism around financial wellbeing and whether employees’ financial problems can be patched up with a ‘shiny wellness package’.  


If you segment your audience effectively to ensure you are talking to your employees about topics relevant to them you can successfully inspire them to take action to improve their finances.  


It is also important to give them time out of their busy lives to sit down and really consider their future financial plans as most people very rarely get this opportunity.  


To help demystify this differences between ‘financial guidance’ and ‘financial advice’ have a look at the cards below which shows what ‘financial guidance’ might cover verses what you could have a 1-1 advice meeting for.

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Essentially, you would require ‘financial advice’ if you need/want a specific recommendation from a qualified advisor.  A financial wellbeing programme would typically cover the topics under ‘financial guidance’ and give broad recommendations.

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Typically it is the young, free & single group that worry about their financial futures the most and according to research* employees in the UK reportedly take four million days off a year because of financial worries.


When considering how to help your employees with their financial worries it is imperative to put yourself in their shoes and be aware that they might feel embarrassed to discuss their financial struggles with their employer, for fear it may hinder their career prospects. 


Financial wellbeing doesn’t have to feel intrusive if it is approached in a considered and reassuring way.  If you appoint an experienced third party financial wellbeing provider and even consider hosting sessions away from the office it will already feel more private to your employees.  You can also reassure them through communications that all discussions will be treated in absolute confidence.  

So, in answer to the title of this blog - we believe that financial wellbeing is very valuable and approached in the right way is unobtrusive to your employees.  Giving them the time and arming them with the expertise they need to get their finances on track will leave them feeling valued and less stressed.

*Financial Wellbeing research - conducted by YouGov and Aegon - survey of more than 2,000 UK employees and 500 HR decision-makers.

Six tips for communicating negative change to employees

Pensions and benefits is constantly evolving and we often see “negative change” being communicated to staff.  


This could be the removal of a benefit, the introduction of an excess charge for Private Medical Insurance (PMI), closing a final salary (DB) pension scheme… the list goes on.  You can probably remember a negative change which you have had to communicate to staff.

 

We have put together six tips on communicating negative change to employees:

 

PLAN 

When is the change coming in?  Work backwards and create a clear comms plan.  Think about how many touch-points you need to get your audience to fully understand your message.  We all like to think that staff will digest and fully understand our first email about a topic, but in reality they probably skim read and take little in.  We would suggest at least three touch-points (or more if this is a very significant change).

 

TARGET

Does the change affect everyone equally? Probably not, it may not even affect a certain population.  It is good practice to think about each population of your audience and tailor the messages to them.  Blanket comms are no good for negative change.  

 

ARM YOUR MANAGERS

Line managers will be one of the first places staff will go to ask questions.  Make sure they are well informed and understand the reason behind the change, so that they can be your “soldiers on the front line”.  If staff receive this news and become downhearted, then they will seek answers to “why have you done this thing that has a negative impact on me?”  If you don’t give your managers the tools to put out the fires, then this could cause tension within their teams. 

 

EMPATHISE

This is perhaps the most important stage, remember we are talking about negative change.  Don’t try to brush over the fact that this is negative, empathise with your staff, understand how this will affect them.  Try to paint a picture of the future.  There is a business decision behind the change, so show them how this will have a positive impact further down the line.  

 

KEY MESSAGES

Create your key messages at the start of the project and continue to reinforce them at every touchpoint.  As we said at the start of this blog, you have to repeat those messages to ensure your audience comes away from each comm with the key info in their head.  

 

FEEDBACK

“Our way or the highway” seldom works with negative change.  You need to let your audience have a voice, allow them to provide you with feedback and this can turn into a two-way conversation once again, giving you the opportunity to reinforce your key messages.  Often we predict that a change will impact someone in a certain way, but assumptions can usually be some way off the mark.  Through feedback you will know exactly what your audiences’ thoughts are and they will perhaps help you to plan the next stage of comms.  

Are mortgages delaying retirement?

For most 25-35 year olds, getting on the property ladder is at the forefront of their financial focus.

Which makes sense... Owning a property comes with many advantages;

- The ability to store equity in the property
- The potential to profit from continued growth in the housing market
- Having a place to call your own

However, rising housing prices, while nice for those who already own a property, have only made it more of a stretch for first-time buyers to get their foot on the ladder!

In the last few years, there have been measures introduced to help first-time buyers, such as the Help to Buy and Lifetime ISA’s.

In a more recent move, some lenders have started offering maximum mortgage terms of up to 40 years (up from 35 years) and increasing the maximum mortgage age to 70 (up from 65).

So what does this mean?
A longer mortgage term generally results in lower monthly repayments, even though you’ll pay interest over a longer period. Some people may prefer this as it frees up disposable income however, it's worth considering how this might affect your intended retirement age!

For anyone planning to retire at age 65, this would mean taking out a 40-year mortgage at age 25, and for many, owning a property by age 25 is fairly unrealistic. Therefore anyone aged 25+ may need to consider pushing back their intended retirement age to ensure their mortgage is paid off before they stop working.

However, it's not all doom and gloom as lenders will now consider mortgages that run into retirement. This does mean meeting eligibility criteria, such as providing proof of retirement income. This may be difficult for anyone in their late 20’s and early 30’s to determine but could be provided at the point of remortgaging in the future.

Is renting such a bad thing?
If we look at other parts of Europe such as France and Germany, the share of rental property far outweighs home ownership. In Berlin, for example, the rental property share is 90%. Although this means you’ll continue paying rent into retirement, it takes away to pressure of trying to save an enormous deposit. It also means people aren’t fixed to an area, they can travel or move elsewhere at a months notice, without worrying about the time and cost involved with selling a property and most importantly it shouldn’t affect your retirement age as there are no borrowing age/time restrictions and the rent can be built into your retirement planning.

 

Disclaimer :- Your property may be repossessed if you do not keep up repayments on your mortgage

3 Steps to delivering an engaging group presentation!

3 Steps to delivering an engaging group presentation!
 

In our first blog on group presentations, we talked about the benefits of holding them, and today we look at the steps you can take to ensure you run an engaging session!

Regardless of the product, service or topic of discussion, there are some key considerations presenters should consider to maximise engagement.

It’s worth remembering that although you might like to think otherwise, the audience may not always be attending a presentation for the sheer thrill of hearing about the topics set out in the agenda. It may be a company requirement/recommendation, to collect CPD credits, or just for some time away from work.

This only emphasises the importance of ensuring a positive experience.

1. Put yourself and the audience at ease

Regardless of how many times you’ve spoken in front of people, it would be false to claim you don’t still get a bit nervous beforehand. A good way to settle the nerves is to have a chat to people as the room begins to fill up. Try to avoid anything related to the presentation and focus on asking them questions…
“How’s your day going?”… “How long have you worked for the company?” …“Where’s good to go for lunch around here?”… “You must be either extremely bored or just very keen to get some time away from work to come and listen to me talk for an hour!”

Not only does this settle your nerves but it prompts immediate engagement from the audience outside the pressure of the presentation, but most importantly, it gives you the opportunity to showcase your personality. It's a fact that if people like you, they will be more likely to pay attention to what you’re saying.

2. The fun doesn’t end here

Just because you’ve had some good conversations and maybe even got a few laughs before the start of the presentation, you could still lose the interest of the audience if you slip into ‘robot mode’ once you start talking business. By this I mean, a monotone voice, scripted bullet point delivery, lack of movement etc.

- Try to keep an enthusiasm in your voice or the audience will become as disinterested as you sound

- Be familiar and confident with your content, long pauses and ‘errms’ can give the impression you don’t know your stuff

- Use relatable examples, once you’ve made a point, think of a way to put this into a real-life scenario

- The most vital part of maintaining the focus of an audience is to ask them questions, make a point and ask for their opinion, or check their existing knowledge by asking a question on the upcoming topic.

3. Drawing to a close

The end of the presentation is your last point of contact with the audience. Hopefully, they’ve enjoyed the content and shown engagement throughout. What’s important now is to provide them with the tools to contact you;

- Make sure your last slide contains the company name and logo, your name, a contact number and an email address. Whilst some people may note this down it's not 100% effective.

- A more direct way of providing the audience with your details is to leave business cards or flyers at the end of each row, or on the seats before the presentation.

- Draw their attention to the above, it’s important to finish with a closing statement highlighting your contact information and to get in touch if they’ve benefitted from the presentation