Employers must take the lead in tackling the UK’s retirement adequacy crisis

Employers will end up taking most of the responsibility for helping to solve the retirement adequacy problem if we are to see real and impactful change in retirement outcomes, according to a new paper by Hymans Robertson. The paper, launched as part of its three-year Retirement Adequacy Project, suggests that although employers face many burdens, they must add this responsibility to their challenging balancing act. The leading pensions and financial services firm’s project aims to equip employers with the means to effectively manage that balance. It also calls on a number of other secondary stakeholders, including providers, the state and individuals, to play their part in ensuring adequacy. Without this commitment to change, the firm warns that there will be wide ranging consequences for the economy, individuals and therefore ultimately employers.

The latest paper explores the different stakeholders that must be involved in helping to resolve the pensions adequacy crisis and concludes that while all have responsibilities, the employer is key. Employers are the means of providing savings and connect all other stakeholders together, placing them at the centre of all retirement adequacy conversations. The individual has the greatest understanding of individual circumstances but the least of pension complexity and scale. The state can decide overall rules but has other distractions and regularly changing priorities. Providers can innovate and develop the saving vehicles used by individuals but rely on the employer to connect to individuals.

Commenting on the need for employers to take a key role in helping to solve the retirement adequacy problem, Leonard Bowman, Head of Corporate Consulting, Hymans Robertson, says:

“Retirement adequacy is one of the most pressing challenges facing individuals in the UK today. The potential risks to employers if it is not addressed are wide ranging and serious. While individuals, providers and the state all play a role, none have the same combination of reach and influence as employers. Employers are uniquely positioned to influence retirement outcomes. They connect employees with providers and hold a position of trust with employees due to the employment relationship. That’s why employers can make such a difference. One way or another, employers will be the driving force for positive change, the question is whether this will be on a proactive or reactive basis. We firmly believe a proactive approach will ensure companies address the adequacy crisis in ways that best align with their strategic priorities, rather than being caught on the back foot.

“The question now is what that means in practice. What strategies and tools will enable this transformation? From innovative benefit design to clear communication and financial wellbeing programmes, employers have the power to embed savings habits and improve outcomes across entire workforces.” 

Commenting on the benefits for employers to tackle the crisis ahead of any government intervention, Mark Stansfield, Actuarial Consultant, Hymans Robertson, says:

“The Pension Commission will present its recommendations to combat the retirement adequacy crisis and this may lead to government intervention. We believe employers would rather take a voluntary and comprehensive approach to make positive strides to tackle the crisis, in a way that fits the specific requirements of their employees. The alternative could be a mandated ‘one-size-fits-all’ approach set out by the government. 

“Employers need to act now to make retirement adequacy a reality for their workforce, in a way that best aligns with their specific business priorities.”

The 'Retirement adequacy and the reliance on responsibility' paper can be found here. 

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