Managing Retirement Doing the right thing by employees (and by the organisation) 1. Introduction This paper addresses the challenges facing organisations in managing retirement today and in the future. It analyses the needs of retirees during their careers and offers an approach to meeting those needs that also meets the needs of the organisation. It is aimed at those who have a responsibility or interest in Retirement Policy and Managing Retirement within an organisation: in particular Senior Management within HR, Pensions, Rewards and Benefits, and L&D. It covers: The Changing nature of retirement The 3 groups of challenges faced by retirees What is doing the right thing? Retirement Today the context Lifestyle needs Financial needs When to retire What do we do to meet those needs? How do we do the right thing? Talking and communicating about retirement Conclusions How LaterLife can help About LaterLife How to obtain more information Underpinning this document are insights from the thousands of retirees that we talk to each year at LaterLife. We run the largest schedule of open retirement planning workshops in the UK: some 150 open courses a year at 45 locations around the UK. In addition we run an extensive programme of inhouse workshops for both Public and Private sector organisations. In all over 1000 organisations use our services. As a result we talk to many thousands of retirees across all industries and sectors giving us a unique insight into their feelings and concerns as they consider retirement and the decision when to retire. We also run the over 50s web site www.laterlife.com for making the most of later life and of retirement, this provides a further set of insights. The insights gained from both these sources are shared within this document. 2. The Changing Nature of Retirement Since the removal of the default retirement age (DRA) in 2011, the nature of retirement and the decision-making around it for both employees and employers has changed considerably. The economic and political environment around retirement is also changing. The principal factors are: the need for earlier and more careful planning to decide when to retire now that the decision is largely in our own hands the gradual changes to work and retirement such as longer working lives, more phased retirements, more focus on work/life balance in later life and portfolio lifestyles, later state pension age and the increasing length and active nature of the retirement period the increasing number of retirees who are members of Defined Contribution rather than Defined Benefit schemes, or a combination of the two and therefore have more important decisions to make to secure their financial future in retirement. This is especially true as a result of the Pension Freedom changes in April 2015 the financial pressures leading to difficulty saving for retirement from early career onwards These issues results in a number of challenges for both employees and organisations. Page 2 of 9 LaterLife Learning 2015
time to retire? It s actually a difficult decision especially for those who are at all concerned about retirement and how they will spend their time or who just aren t very good decision-makers. There is a real danger of people drifting on at work rather than making that decision, to the detriment of themselves and potentially of the organisation. So if we are going to do the right thing by employees we need to understand and address these three challenges. It s also important to say that doing the right thing by employees can also result in doing the right thing for the organisation. 4. What is doing the right thing? 3. The Three Challenges There are 3 different set of challenges as we approach retirement. The first two are regularly articulated by our delegates when they come on a pre-retirement course. Let s now turn to take a look at doing the right thing. We ve seen that one of the challenges is lifestyle and how people will spend their time. So at this The first and most obvious one is finance and concerns whether they will have enough to have a good retirement. Typically they have a reasonable handle on their likely income in retirement but few have really looked at what their expenditure is likely to be in any detail and may often be making wrong assumptions. The second challenge is lifestyle and in particular how they will spend their time in retirement. However, everyone is different: our delegates range from those who are looking forward to it to those who are concerned or even frightened about it. In fact a pre-course survey we have been running recently indicates that overall around 32% of delegates are concerned or unsure about retirement. But even some of those who say they can t wait to retire also express apprehension. However, this is from a population where 80% have already made the decision when to retire and only 20% are looking to the course to help them decide when to retire; anecdotally we believe there are wider concerns amongst those who haven t yet made the step of attending a course. We also have a web tool called How ready are you to retire? where people can test their readiness by scoring against 20 questions. The results show that the main area where they feel ill-prepared is lifestyle planning. Interestingly, although the answers show concern about finance they also show a higher degree of understanding of their financial situation. The third challenge has come about as a result of removal of the DRA it s deciding when is the right point we need to provide a bit of context about what retirement is like these days, because unless you are relatively close to it yourself it can be difficult to understand what retirement is like. Indeed, we find that the majority of our delegates, even though their retirement may be imminent, don t have much of an understanding. We need to understand this context in order to understand the needs of retirees. 4.1. Retirement Today the context The first thing to say is that retirement is one of the most significant life changes that we ever experience. It ushers in a change of life as significant as getting married or having a first child. Suddenly we have 40-50 hours of extra leisure time, on top of previous leisure time, every week, with hopefully 20-25 years of good active life stretching ahead of us. In addition, for the first time in our lives, we have no structure. Previously we have always had structure; first from our parents, then from school, then from work, but now suddenly there is nothing to fall back on. It is a great Page 3 of 9 LaterLife Learning 2015
opportunity to write our own job description but it is also a tall order to decide how to spend all this time for the next 20-25 years in a way that is both enjoyable and fulfilling. You can get retirement wrong too; there are pitfalls ranging from relationships (where suddenly you may be spending more time with a partner than you ever have done before) to loss of social network from work, loss of status and self-esteem, neglecting health and fitness and having insufficient stimulating activities. By contrast, those that have a successful retirement have a range of interesting and fulfilling activities that enable them to achieve the 5 fundamentals of retirement: may well be familiar with. However, traditionally such a course is offered in the last year before retiring. However, if it is now going to help individuals decide the work/life balance they want and to decide when they want to retire or partially retire, it ideally needs to be done 2 or 3 years before potential retirement. Just to reinforce the value for the employee of doing this, a study with University of Greenwich showed a 19% increase in life satisfaction in retirement for those who attended a retirement planning course compared to those that didn t. 4.3 Financial Needs Staying physically fit Staying mentally fit Maintaining or increasing your social network Staying financially fit (living within your means) Enjoying it! The bottom line is that retirement today is another major phase of life. There are huge opportunities and if planned properly it can be the most satisfying period of life, in which you are in control. 4.2. Lifestyle needs So, let s pull out of the above the needs that people have. So let s move to the financial side of things. Clearly we each have to decide, on the basis of the lifestyle we want, how much we might need to support that lifestyle and to plan accordingly. However, doing that 2 or 3 years before is clearly no good, because by that time you typically have little room for manoeuvre to build up additional funds if you decide that is what you need. Essentially the key is to develop an understanding of what retirement might mean for them. That means doing some planning, understanding both the pitfalls and the opportunities and then developing the ideas of how they want to spend their time. It is very important to understand how their plans will allow them to achieve those 5 fundamentals of retirement This is typically delivered by a Pre-retirement Course (as long as it is lifestyle focused) which you So there is a key point around age 50 when retirement does typically start to assume a bit more reality and there is still some time to have an effect on finances. So a workshop at this point focused mainly on finance but with a little lifestyle, is being used by an increasing number of organisations. Pension Freedom has also introduced the need to understand options and implications prior to age 55 when individuals are now able to access their pension pots and can easily make far reaching decisions without full understanding of the implications. However, as we all know, the sooner you start to build up retirement funds the better it is. So ideally this starts early on in people s careers, but there are two problems: for most young people retirement is a Page 4 of 9 LaterLife Learning 2015
very distant prospect and very few have a good understanding of finance. So if we want to help employees we need to help them understand finance early on and within that to understand the value of starting to save for retirement early. This will be of immense value to them throughout life as well as hopefully ensuring they are financially fit when they eventually get close to retirement. Ideally they need access to both finance education seminars and also some one-toone assistance to get answers to specific questions. That doesn t necessarily mean a financial adviser but a finance professional who can answer questions and point them in the right direction. There are also important financial decisions close to retirement and, with the Pension Freedom changes brought in from April 2015, the choices are now wider and potentially more far reaching. There are also things the organisation can do to help maximise the retirement income they get, such as access to open market annuity option quotes for those who still think that an annuity is best for them, or to act as a comparison to other options before they make their final decision. 4.4 When to retire Coming back briefly to the third challenge: the decision when to retire. As mentioned earlier there is now a distinct danger of, not so much clinging on as depicted in the cartoon, but drifting on, especially for those who are at all concerned. So if we address lifestyle and financial education in the way described at appropriate workshops, then we allow people to understand what retirement can mean to them and to approach it logically rather than emotionally. This invariably means that they see the opportunities that retirement offers and make appropriate decisions about what is best for them. This is a key benefit of doing all this for the organisation. It can remove barriers to retirement The overall aim that many organisations are now expressing is to assist employees to build up sufficient retirement finances in order to retire at the time they want to and to support the lifestyle they want to have. Just one other quick thing: partial retirement is potentially a much better option than full retirement and it clearly helps the finances. It s always been a bit of a nonsense to go from working 5 days a week to none at all. So, if the organisation can provide the possibility of part-time working or flexible working as an option, that is clearly of benefit to the individual and can potentially provide flexibility to the organisation too. and it also removes emotion and enables logical discussions for the benefit of both individual and employer. Page 5 of 9 LaterLife Learning 2015
5. What do we do to meet those needs? How do we do the right thing? In fact we ve already drawn out the answers to these but in summary there are 3 key points: early in one s career when one needs basic financial education, mid career when there is still time to make changes to finances and it has become much more real and in the few years before retirement when both lifestyle and some key financial decisions need to be taken. Around this there would ideally be access to someone to answer specific questions on the phone or face to face. It s worth pointing out that there is an element of lifestyle throughout this process : mainly finance in early life changing gradually to mainly lifestyle in the few years before retirement. The one thing not mentioned so far is any support in retirement. Ideally to do the right thing by employees there are things in this area too: ranging from social clubs, magazines and web sites to post-retirement courses. You might have guessed that having done this analysis ourselves LaterLife have an offering in all these areas, including the post-retirement area.
6. Talking and Communicating Finally let s touch on conversations about retirement. In particular, concerns about discussing retirement because of potential age discrimination issues, which surfaced when the DRA was removed. At LaterLife we have found a complete mix of situations: some organisations have no problems at all with continuing to have retirement discussions and promoting retirement planning others are not offering assistance because of their concerns, although these are largely unfounded. Then there are a whole new group of employers who have seen that offering retirement planning assistance is actually of value to everyone and have introduced it for the first time. In fact concerns about discussing retirement and offering assistance to those approaching potential retirement isn t an issue as long as you follow a few basics and in particular remember these words: if what you are doing is a legitimate aim and is objectively justifiable then you don t have a problem 7. Conclusion We would suggest that doing the right thing for employees means addressing each of the areas identified: Financial education and planning Retirement lifestyle planning Deciding when to retire Retirement Conversations Such an approach is both good for the employee and also good for the organisation. 8. How LaterLife can help Not surprisingly in analysing the above situation and needs, we have put together a complete portfolio for managing every aspect of retirement in an organisation. In particular this includes a Career Retirement Planning programme. It s absolutely true to say that if you aren t having retirement conversations then you aren t doing right by employees. We also now see some organisations building retirement conversations into the appraisal process as part of discussing the future, which is in many ways the ideal approach. There is however a problem in that many delegates attending LaterLife workshops say their managers are unable to discuss retirement because they don t have a clue about it. So there is potentially a manager education requirement in all this too. It goes without saying that any of the workshops and assistance options discussed, which the organisation decides to offer, and the approach to retirement conversations, should be captured as part of the organisation s retirement policy. This policy should be visible to employees and can by itself contribute to removing any dangers of perceived age discrimination. Retirement conversations is a big topic in its own right and if your organisation is concerned about it we have written a comprehensive guide, so if you would like a copy emailed to you just send an email to the address under How to obtain more information at the end of this document. In summary this portfolio includes: Our traditional 1 day Retirement Planning Workshop for those within a few years of possible retirement. This covers all aspects of planning retirement with a focus on lifestyle aspects but also covering finance and all the key decisions that need to be made, including the options offered by Pension Freedom. It recognises the changing nature of retirement and the increased likelihood of phased retirement and portfolio lifestyles. It also assists the decision when to retire for those who haven t already done so. It is offered as part of our open workshop programme around the country or as an in-house option. As well as our traditional 1 day Retirement Planning Workshop, the option of a 1½ day workshop where the extra ½ day provides additional finance information for those with a particular need or interest in this area. Page 7 of 9 LaterLife Learning 2015
A Career Retirement Planning programme consisting of: Early-Career Financial Education seminars, with more advanced options and retirement specific options at selected career points MidLife Retirement Planning LaterLife Retirement Planning One-to-one Financial Clinics Helpline Review Prompt service to prompt employees to review specific areas at key stages of their career At the early career stage the focus is on general financial education, with retirement as one specific long term planning need. As delegates progress through the Career Retirement Planning programme the balance shifts gradually to lifestyle planning. The short One-to-one Financial Clinics can be related to retirement or any financial matters. LaterLife in Action - a supplement, or alternative, to the organisation s own communications to their pensioner community. It provides web facilities with relevant reference information, monthly articles, and associated monthly email newsletters. LaterLife at Work - provides a bespoke solution to any needs an organisation may have in addressing strategic and practical issues relating to a multi-age workforce and extended working lives. Note that the extra Finance ½ day in the 1½ day planning retirement workshops and the financial education seminars, One-to-One Clinics, Helpline and Review Prompt service are provided in conjunction with finance professionals from Jelf Group plc, a leading Employee Benefits organisation (see next page). If you would like to receive a summary of the entire portfolio, or datasheets on any of the individual items, see How to obtain more information at the end of this document. 9. About LaterLife At LaterLife Learning we are retirement specialists, providing both in-house Planning Retirement workshops and the most extensive schedule of open workshops available in the UK. The workshops cover every aspect of retirement and receive unparalleled feedback. Our reputation has been built over the last 15 years based on the lifestyle focus of our planning for retirement workshops, enabling us to provide the most effective courses available. As a result we have become the leading provider of open courses all around the UK. We had previously extended what we offer to midlife retirement planning courses but now we have taken that much further with our Career Retirement Planning programme, which provides for financial education early in employees careers, including financial retirement planning, plus other financial education options throughout their careers. This new portfolio has been enabled by the fact that in October 2013 we became part of Jelf which is a leading independent consultancy providing expert advice on employee benefits, healthcare, insurance and financial planning for businesses and individuals. This merging of LaterLife into Jelf brought together the complementary capabilities of LaterLife s retirement lifestyle knowledge and skills and Jelf s financial professionalism and services for organisations. The result is that we are able to provide an end-to-end Managing Retirement offer, with experts available in every aspect. The new portfolio means that we can jointly assist with any aspect of retirement planning or of managing an extended age workforce and tailor what we provide to meet any Employee Benefits need. The value of this integrated approach was recognised by Jelf and LaterLife together winning the Pension Age At-Retirement Solutions Provider of the Year award for 2014. Page 8 of 9 LaterLife Learning 2015
10. How to obtain more information If you would like to receive a summary of the entire portfolio or datasheets on any of the individual items mentioned just email learningteam@laterlife.com and we will email the information to you. Alternatively call us at LaterLife on 01189 88 01 88 and we ll be pleased to discuss any aspect with you. Page 9 of 9 LaterLife Learning 2015