Workers face ‘impoverished’ retirement

The financial wellbeing of hundreds of thousands of workers in Scotland is at risk, according to a think tank which has warned that Labour’s efforts to boost the UK economy could be derailed by a “tired and stressed workforce”.
Research by the Edinburgh-based David Hume Institute (DHI) suggests that a third of employers provide the bare minimum when it comes to sick pay, healthcare and pensions. Staff in hospitality, retail and social care are the most financially vulnerable.
The think tank raises the prospect of a future generation of “impoverished, elderly people” who are unable to save enough money for a comfortable retirement and warns that one in four Scots lose sleep over money worries.
More than two thirds of businesses in Scotland are concerned that productivity is being harmed by stressed staff amid rising rates of health-related absenteeism.
The DHI is urging Sir Keir Starmer, the prime minister, to act on his pledge to “make work pay”, including reviewing statutory minimums for sick pay and pension contributions to tackle Britain’s looming retirement crisis.
“Our findings show that we are facing a ticking time bomb,” Susan Murray, director of the DHI, said. “It is hard for the economy to thrive when a quarter of the workforce is losing sleep over their finances.
“Over two thirds of employers have noticed the impact of financial strain on people’s performance at work. Steps must be taken to rebalance the risks for people and the economy to thrive now and in the future.”
The DHI report, The Great Risk Transfer, examines the wider shift away from the state and employers to individuals for financial wellbeing in other areas such as healthcare.
The research, partly funded by the Institute and Faculty of Actuaries, was conducted in May and June and involved interviews and surveys with employers and employees in the public, private and voluntary sectors.
Companies ranged in size from more than 60,000 to fewer than ten staff. The findings suggest the notion that individuals are being empowered to take control of their financial wellbeing is a “myth”.
About 40 per cent of working age people across the UK struggle to save enough to meet the minimum target for an adequate retirement income and the same number are not confident of being able to meet an emergency expense of £500 without borrowing money.
The DHI said that better funding for the Money and Pensions Service was needed to help deliver a digital pensions hub and that government and employers must do more to support employees. Such measures could include wider access to payroll savings schemes and enhanced workplace pension schemes.
The report includes a survey by the Diffley Partnership, an independent research agency in Edinburgh, of 550 businesses across Scotland. One in three (33 per cent) admitted that they did not offer any enhanced benefits, beyond statutory minimums, as part of their employee benefits package.
More than half (56 per cent) said they did not include financial wellbeing in strategies to support employees, although of these just over a quarter (26 per cent) said a policy was being developed.
More than two thirds (70 per cent) admitted to concern over the impact of financial strain on their employees and their productivity, citing increased stress on managers and other staff (35 per cent) and a rise in absenteeism owing to poor health (28 per cent).
Catherine McWilliam, from the Institute of Directors, which represents 1,000 business leaders and decision-makers in Scotland, said: “The findings chime with feedback from our members. We have had a decade of uncertainty and firefighting in Scotland with rising costs against the backdrop of a tight labour market. We need to have an honest and transparent discussion to find solutions with the private sector working with the government.”
Jo Buckley, chief executive of Impact Scotland, an arts charity that has nine staff, said: “There is a disconnect between what we would like to do for employees and can afford to do. We don’t have the resources to offer a substantial workplace pension and we’re not alone; there are lots of small businesses in a similar position.”
Liz Smith, the Conservative spokeswoman on finance and the economy, said there were significant concerns about the future of Scotland’s labour force and pointed to rising pension costs for employers that had put a “tight squeeze” on employees, notably in education and health sectors.
“A high level of economic inactivity has had a detrimental effect on growth and productivity,” she added. “One reason relates to financial insecurity amongst employees, especially if they feel they are not getting a fair deal from their employers when it comes to pensions and sick pay. It is therefore important that the whole pension landscape is reformed.”