Retirement savings gap threatens business plans
The way employees retire—or can’t—has become a business problem, not just a pension issue.
Retirement shortfalls hit productivity and costs
Employers now face higher expenses and staffing disruptions when workers cannot afford to retire. A recent analysis by Hymans Robertson shows that poor retirement outcomes threaten productivity, absenteeism, and long-term workforce planning.
Delayed retirements, changing work patterns, and declining healthy life expectancy create commercial risks. Many employees remain in their jobs because they lack sufficient savings. The consultancy used its Guided Outcomes modeling to assess retirement adequacy across different workforces, pinpointing where shortfalls are most severe.
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One large health-sector employer discovered 15% of its staff faced a very high risk of retirement inadequacy, projected to fall below the UK’s minimum living standard. Another three-quarters were expected to reach only moderate standards, suggesting a significant proportion could still face inadequate outcomes.
Policy fixes may not be enough
Addressing these gaps comes at a high cost. For the same employer, expanding automatic enrollment, raising minimum contributions, and capping salary-sacrifice savings at £2,000 from April 2029 could increase costs by around 25%. Yet even these measures may not ensure better outcomes for all workers.
Mark Stansfield, a senior actuarial consultant at Hymans Robertson, stated that the issue is already affecting companies. “Many employers are dealing with employee financial stress and shifting work and retirement patterns,” he said. “These factors can reduce productivity and disrupt long-term business planning.”
Stansfield noted that risks vary across teams and roles. Some groups face far greater shortfalls, requiring targeted analysis to direct support effectively. He also advised against relying on government reforms. “While changes to automatic enrolment and higher contributions would raise employer costs, they may not resolve the adequacy problem for every workforce,” he said.
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For workers focused on immediate financial pressures, retirement savings often seem distant. Pension dashboards, which make savings more visible, could force a reckoning for those who haven’t grasped their shortfall. The system may not be designed to help all groups achieve sustainable outcomes.
Hannah English, head of defined contribution corporate consulting at the firm, said employers should view pension design as part of their broader workforce strategy. “Employees must balance long-term saving with day-to-day expenses,” she said. “For many, retirement still feels far off. The real test will come when dashboards make their pension position clear.”
That clarity could lead more workers to delay retirement, adding pressure to employers already managing aging workforces. The issue extends beyond finances—it questions whether the system adapts to how people live and work, rather than how policymakers expect them to.
