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The Great Unretirement

The Great Un-Retirement: What Pensions And Administrators Should Be Considering Right Now

Monday, 26 September 2022

By Luke Carter - Regulatory Consultant for Life & Pensions at Equiniti

It’s official; the over 50s are getting back to work.

The ONS survey on the UK workforce is not normally something people in the pensions industry get excited about. The latest survey is different. It shows an increasing number of over 50’s working. During the pandemic, the number of people over 50 that were working, or at least working full-time, declined. The trend was expected to continue, but the latest upswing shows a reversal of this trend.

Times have changed

Why is this significant? Firstly, people who are over 50 re-entering the workforce present different challenges and opportunities as compared to younger staff joining the workforce. Employers get skilled and knowledgeable staff, but new ways of working could be a challenge to this group. They may have only worked previously in office environments. But if individuals left the workforce at the start or even before the pandemic, remote and digital-first ways of working may mean they need extra support to get used to a new way of work life.

A need to answer many questions

This generation re-entering the workforce also presents challenges for pension schemes, product providers and their administrators. Irrespective of age, for many people re-entering the workforce, this could be the first time they have encountered automatic enrolment.

When servicing this demographic, administrators should be prepared to deal with the questions that they first encountered when this was initially rolled out. For example, “What is auto-enrolment?” “Do I have to contribute?”

A number of people may simultaneously be drawing down a pension which will mean a larger population affected by the reduced money purchase annual allowance. Schemes and pension products will need to have in place systems and procedures to manage this larger population of potentially impacted people. They will need to monitor their contributions and ensure that they do not breach this reduced limit.

This then presents ongoing administration challenges. Contributions must not get mixed between funds being used to pay the pension and the new funds into which they are now saving.

For the administrator, it will mean having the systems in place to both receive and invest contributions whilst paying out any benefits. There is also the capability needed to identify the correct scheme or policy arrangement, where multiple arrangements are held and ensure the right activities are undertaken.

For pensions paying out funds via drawdown, there will also be a need to operate ‘lifestyling’ for the new contributions whilst accounting for ‘investment pathways’ for the drawdown funds.

Considering increased vulnerability

In a survey conducted by Rest Less, a digital community for the over 50’s, reasons for returning to work were explored. The two main reasons given were the need for social contact and the current financial pressures. Both indicate that the people returning are in some way more vulnerable. This, again, adds a new servicing consideration; how to support individuals through the process of un-retiring?  

As many of the people returning to work may not have been planning on doing so, there may be additional communication issues. Individuals may ask, “Why am I saving into a pension?” and “How do I stop?” Pension solutions and their administrators must be prepared to deal with these issues whilst being careful not to stray into what could be interpreted as giving financial advice.

Ultimately, what’s needed are well-skilled and trained staff that are used to dealing with complex retirement problems. Modern technology platforms that can manage the issues and advance functionality needed. Plus, experienced servicing teams who are trained to identify and deal with vulnerable customers.

Bring plans forward

One final area that both the government and pensions industry needs to be ready to address is state pensions for those returning to work over state pension age. Many returning will be concerned that working will impact their state pension. So pension schemes, providers and their administrators, the Money and Pension Service, and benefit offices need to provide this support and have accessible and understandable guides readily available in different mediums.

Whilst the returning workforce trend presents challenges, well-prepared schemes and pension providers have been expecting and planning for future change with their administration partners/functions. The cost of living crisis has seemingly become the catalyst in moving forward the timeframes for dealing with known changes. However, pension solutions across both the retail and workplace will now need to implement earlier than their anticipated plans.

It’s about managing members and policy holders in a phased retirement environment, where individuals are both paying in and drawing money down. 

There are tools and skills that can help. Using a modern technology platform is a good start. Having skilled resources that are used to dealing with complex retirement products is also part of the solution. Increasingly, staff trained to deal with vulnerable customers are the foundation. Allowing an organisation to manage the more intricate communication problems presented by this shift in people returning to work.

Welcoming diversity in age, once again

Having a diverse age group in the work environment can bring much to a business and individuals. Undoubtedly, the benefits will always outweigh the challenges.