Forty-eight percentof HR Directors of large companies fear their workforce will hold them responsible if they make poor decisions due to freedom and choice in pensions. 

Employers believe their workers are just as likely to look to them (63 percent) as to the Government (62 percent) for guidance on retirement. However only 39 percent believe they should pay for employees’ financial advice and only 41 percent believe their workers will be willing to pay for it themselves. This ‘guidance gap’ highlights the need for employers to find cost-effective solutions to help workers make informed decisions about retirement

Britain’s large employers fear the 6th April pension freedoms could herald a backlash against them when ex-employees look back at the choices they made at retirement. This is according to research among HR Directors at large companies released today from Hymans Robertson, the independent pensions, benefits and risk consultancy. The findings highlight the need for employers to consider how best to support employees on retirement planning in the context of their new found freedom, without increasing costs significantly. Paul Waters, Partner at Hymans Robertson, explains: “Recently Martin Wheatley from the FCA stood up and asked a key question about the pension reforms – where does responsibility lie if retirees make poor decisions and run out of money? Clearly Britain’s large employers are asking the same thing.

“In their view employees are just as likely to depend on them as on Pensions Wise for guidance on retirement decisions. If some retirees fall through the cracks and make poor decisions the finger of blame could be pointed in many directions, including at employers.” Paying for full advice doesn’t look like an option employers are willing to fund, nor do they think their workers are willing to pay for it themselves. We would agree. Individuals need advice, but they don’t value it, and certainly not enough to pay for it. Research we conducted last year showed that 57 percent of people would ensure that they make the right decisions by ‘doing it themselves’. Only 22 percent said they’d be willing to pay for external advice and of those they are only prepared to spend on average just £37 for it.

“People need access to better tools to help them understand their own personal circumstances. They need to be able to appreciate the impact of withdrawals from their pension schemes – particularly in relation to when they’ll be able to retire with an income that’s adequate – and then what levers they can use to get back on track. “For the pension freedoms to be a success there needs to be better guidance in place, both pre- and at-retirement, to ensure people don’t run out of money. Greater support is needed to help people make the right choices in the face of much more complexity. Low cost online tools definitely have a role to play. “Our research has shown that many HR Directors have made making the availability of online guidance tools a priority. As the reality of the pension freedoms kicks in, and as everyone realises just how complex the decisions people need to make pre-retirement, at retirement and also through retirement, we’re sure many others will follow suit.”