Posted by

Lynn Graves, Head of Business Development.

17 Mar 2015

While many small and medium enterprises navigate towards their auto enrolment stage dates, further changes are afoot when the new pension freedoms come into effect in April. Not only will more people be saving for their retirement, but in a few weeks they’ll also have the freedom to use that money however they see fit.

Over 55s will be able to withdraw some or all of their pension savings, take several smaller lump sums over numerous years, or leave it invested - potentially switching between saving and drawing down over time.

This is great news for employees who can look forward to a more comfortable retirement that suits their lifestyle, however employers have a big responsibility to ensure the pension they offer their staff is not only compliant and fit for purpose, but also that their employees are adequately prepared with the knowledge and understanding to make those all important decisions at retirement.

As auto enrolment has rolled out, larger employers quickly discovered a lack of understanding not just about pensions, but also general finances amongst their workforce - and this is before the nuances of the new freedoms were considered. This is concerning when our research has shown that nearly one in ten employees is likely to consider their employer as a source of support or information about pensions.

This means you could be faced with questions not just to help employees understand their new pension, but also what the new freedoms mean for them and where can they get more information from.

For smaller employers still yet to stage, you have the luxury of time to consider how you will tackle this potential dependence from your workforce, or better yet, stem the issue before it takes hold.

The Scottish Widows mantra of ‘life feels better with a plan’ could certainly be true here. By building some basic financial education into your auto enrolment communications you could prevent employee queries from ever becoming an issue.

It would be prudent to be upfront with your workforce about what information you’re able to provide, and make use of the many sources of support and information available out there.

Signposting the Government Guidance Guarantee to those over 55 in your workforce is a sensible first step. As far as we know the content of the guidance is still under construction, however we do know it will be offered by The Pensions Advisory Service over the phone and face-to-face appointments will be offered by the Citizen’s Advice Bureau.

In addition some pension providers also supply information online, like the Scottish Widows Retirement Explained site where employees can access information about the new freedoms, and websites like offer search engines to locate Independent Financial Advisors for paid for advice which your employees may also find useful.

But the reality is we still don’t know what people are going to do with their money post-April so avoid doing too much too quickly until the industry gets to grips with the new freedoms.

All views expressed in guest blogs are that of the authors, and not of the British Chambers of Commerce.