Why younger employees shouldn’t ignore retirement planning

Retirement feels distant for many younger workers – something to worry about ‘later’. But as an HR professional or business owner, you have an opportunity to help your workforce take more interest in their financial future. Here’s why you should encourage younger staff to think ahead and how to do it.

The cost of delaying retirement planning

Postponing retirement planning means losing valuable time for saving and investing. Compound interest, often called the ‘eighth wonder of the world’, works best over long periods. Even a few years’ delay can significantly reduce the final pension pot.

An employee who starts contributing at 25 rather than 35 will likely build a significantly bigger pot. Prompting employees to act early reduces the risk of future financial stress and can help generate loyalty, benefiting your business and your staff.

Small steps that make a big impact

You don’t need to overhaul your entire benefits programme to make a difference. Little things like encouraging automatic enrolment, raising awareness with regular communications and offering simple financial education sessions can increase engagement. Being responsive to pension requests is another big thing.

Employees are likely to feel more in control and motivated when they understand their pensions and see their contributions grow steadily. You can support these initiatives by partnering with financial advisors or using accessible digital tools and providers.

Understanding how different pension schemes work

All staff can find the pension market confusing, which risks disengagement. Helping them understand the schemes they are enrolled in will provide them with greater clarity on what benefits they can expect.  

Defined contribution schemes are common, allowing employees to contribute directly to their retirement pot, with their employer making contributions based on a percentage of the employee’s salary too. These differ from now increasingly rare defined benefit schemes, which offer guaranteed income based on salary and years of service. Due to the cost uncertainty of these schemes – i.e. members living longer than expected and therefore the pension having to be paid by the employer for longer than planned, many private-sector enterprises these days are looking to transfer risk from legacy defined benefit pension schemes, to an insurer. 

There’s also a key distinction between personal and workplace pensions. Explaining these differences with clear examples can help people see how their career plans and life goals can align with the scheme they are in. Transparency ultimately helps to reduce anxiety about retirement planning.

How to support younger employees with retirement planning

You can play a big role in making retirement planning relevant and accessible. Offering interactive workshops or one-on-one sessions with pension experts gives staff practical guidance rather than empty, generic advice. 

You may want to integrate pension planning into onboarding processes to normalise the conversation. You could also create peer support groups or incentives that reward forward thinking. Creating an environment where employees feel supported and more knowledgeable can be incredibly powerful.

Encouraging younger employees to think seriously about retirement planning builds resilience, understanding and engagement. The steps you take can build a stronger workforce and secure better outcomes for everyone involved.