Talking about finances at work can seem like a taboo subject, especially given that conversations about salaries, bonuses or saving for retirement usually take place behind closed doors. If you are a member of a group savings scheme through your employer, such as a pension, provident or umbrella fund, you may have burning questions about how this will impact your retirement.
You may feel worried about raising some of these questions given that conversations about finances at work are usually shrouded in secrecy. But the reality is that what you do in the lead up to retirement will determine the experience you have at and during retirement. Asking your employer the tough questions now may save you a lot of trouble later, and allow you to take charge of your own future.
Employees often feel that they can’t talk about finances in the workplace because of the fear of being judged, being viewed as naive or ignorant, or because their personal circumstances may differ drastically to others’, putting them on an unequal footing. Common concerns include: Will I have enough at retirement to live comfortably; am I saving enough; how much do I need; and how do I know that the group savings scheme is right for me and my circumstances?
But to get the most out of your group savings scheme, and to ensure that you take control of your own retirement savings, ask the following tough questions of your employer or retirement fund provider:
1. How much does being part of the group retirement savings scheme cost? What are the fees?
By their nature, group savings schemes should be cost-effective. However, not every scheme is the same, and some have opaque and confusing fee structures. Good group savings schemes should be transparent, simple and have an easy-to-understand fee structure. If you don’t understand it, chances are that you may be paying too much, in which case it may be in your best interest to openly discuss alternative options with your employer.
2. Being part of a group savings scheme feels paradoxical in the age of individualisation and personalisation. What level of personalisation do I get with my group savings scheme?
Often good service is sacrificed in group savings schemes, but if you are part of a good one, you should be able to access your own account where you can manage your preferences online. Ask your employer whether you have your own secure online account via a safe portal. Newer, savvier providers may be able to offer a more engaging experience. Group savings schemes that offer more digitally driven experiences with innovative communication methods will stand out from the crowd in the age of personalisation.
3. What happens to my savings if I change jobs?
Regulations require that the default option is for your savings to be preserved in the scheme if you leave your employer, but you should also be able to access your investment if you need to, depending on the rules of your specific scheme.
Alternatively, you may choose to transfer your savings to a different product provider if you no longer feel that your ex-employer’s scheme is suitable for you. It’s important to realise that you may negatively affect your lifestyle in retirement if you withdraw your retirement savings when changing jobs.
4. How do the default fund selections work in a group savings scheme and what are my options?
According to regulations, the trustees of group retirement savings schemes are required to approve suitable default investment strategies for members. A default investment strategy is designed to automatically invest your retirement savings into pre-selected portfolios unless you prefer to make your own investment decision – in which case you can opt out. If your provider offers a digital platform, you should also be able to manage your investment portfolio preferences online.
Your retirement, your responsibility
While your employer can make your life a little easier by offering a good group retirement savings option, the responsibility for your retirement ultimately rests on your shoulders. Make sure you’re informed and suitably equipped to make the necessary decisions. If you don’t feel comfortable making these decisions on your own, it might be worth consulting with an independent financial adviser, or your group scheme’s adviser if your employer has appointed one.