We surveyed 1,000 workers aged 18-55 from small to medium-sized UK businesses to understand their views and understanding of workplace pensions.
With the vast majority of employees now enrolled into a workplace pension, we wanted to better understand just how much they understand their pension arrangement and what saving for retirement means to them.
Workplace Pensions Are a Priority For Workers
Employees Don’t Understand Workplace Pension
Employer Communication Needs To Improve
Employees Want Employers To Provide Hands-On Advice
With the UK population living longer and the threat of a potential old-age poverty crisis, saving for retirement has never been more important than it is today.
However, regardless of how important it is, saving for something that’s not going to happen for 30-40 years is hard for a lot of people to justify, especially when they have the here and now to think about. Or is it?
Out of the 1,000 workers we surveyed, 87% said they contribute to their workplace pension. This should come as no surprise as auto-enrolment is now a legal obligation for employers.
What is surprising is the value employees place on workplace pension contributions as an employee benefit.
Apart from more holidays (60%), when asked which benefits respondents would like employers to provide over the legal minimum, 58% said higher pension contributions.
This was higher than better sick pay and better maternity/paternity pay.
Even when given a broader list of employee benefit options, which included those that aren’t legally required, 41% of respondents still said that additional employer pension contributions were important to them; this puts them in the top three most sought after employee benefits.
This is a 45 percentage rate increase from when we last surveyed individuals as part of our 2021 Employee Benefits & Workplace Satisfaction Survey.
Clearly, employees are thinking more and more about their retirement and looking to their employers for support when it comes to saving more.
When asked, ‘When considering a new employer, is the new employer’s pension provision an important factor?’ 56% of respondents said that it was.
This makes workplace pensions not just important to employees, but also to employers. By not offering a competitive pension provision, many businesses could face losing top talent or not even attracting it in the first place.
So when reviewing or implementing new employee benefits, it’s worthwhile considering better pension provisions as a key offering.
Despite the majority of respondents contributing into a workplace pension (87%) and investing in their future, a large proportion of workers don’t actually know how much they are contributing.
Of the 869 respondents who said they contributed into a workplace pension, 49% said they didn’t know what percentage of their employed earnings they contributed each month.
Not only this, 41% of respondents didn’t know what percentage their employer contributed either.
The lack of understanding about contributions raises the question, ‘How do employees know if they are saving enough for retirement?’ The answer to this would appear to be that they don’t.
When asked, ‘Do you feel you contribute enough towards your workplace pension?’ 34% said they didn’t think they were or weren’t sure.
29% of respondents also disagreed or strongly disagreed when asked if they felt their employer contributed enough to their workplace pension, with 26% not agreeing or disagreeing.
The significant proportion of respondents not knowing how much is being contributed or whether it is enough, suggests that employees have a general lack of understanding of their workplace pensions.
When asked more directly whether or not they felt they had a good understanding, 28% of respondents said they didn’t.
Nearly 1 in 2 respondents said that they don’t understand the tax relief benefits of a workplace pension or what salary sacrifice is.
Not understanding these makes it extremely difficult for employees to plan for the retirement they want.
Our survey results suggest that, although workers don’t necessarily understand workplace pensions, they do see that they have value. The majority of workers pay into a scheme, and they are seen as one of the most important employee benefits employers can offer.
Despite this, without employees knowing what they are contributing or really understanding how workplace pensions work, there is a significant chance that they won’t have enough saved for their retirement.
Employers can play a critical role in ensuring that this doesn’t happen. However, to do this, they need to know exactly what their employees want.
When asked which areas employees would like help with to understand their workplace pension better, the top response was ‘help to ensure they are saving enough for retirement’.
This was followed by wanting to understand the tax relief benefits that come with pension savings.
Although 70% of respondents said that they knew where to find information about their workplace pension, 27% disagreed or strongly disagreed when asked whether they were satisfied with the level of communication and education provided.
This, alongside the general lack of understanding, suggests that employers can improve their workplace pension communications. Sending information more frequently or in a different format or style could help employees understand their workplace pensions.
Understanding exactly what employees want will make it much easier for employers to provide educational materials that are engaging and useful.
The most popular channel employers use to communicate is email, with 52% of respondents saying they receive information about their workplace pension in this way. This was followed by 34% saying their employer used an intranet site.
When asked what forms of communication employees would prefer to receive, there was a definite shift in responses.
Although email still came out as the most preferred format (53%), what was interesting was how many respondents said that they would prefer a more hands-on approach, such as 1-to-1s and meetings with financial advisers.
These results suggest that to get employees to engage with workplace pension communications, employers need to use a combination of digital channels with more interactive options, such as 1-to-1 advice.
Another way employers can help employees save more for retirement is to increase their company’s contributions. This might not come as a surprise, but it is interesting that, when asked if they would contribute more to their workplace pension if their employer also increased contributions, 63% of respondents said they would.
Clearly, employees are more willing to invest in their future if they can see their employers are investing in it too. With this in mind, including additional workplace pension contributions as part of an employee benefits package can be a powerful tool in helping employees get the retirement they want. It can also help employers recruit and retain top talent.
Despite making regular contributions and placing additional employer pension contributions high on their priority list, employees still don’t understand enough about their workplace pension. As a result, they risk running out of money in retirement.
To prevent this from happening, employers must do more to provide employees with the tools and knowledge they need to plan for a comfortable retirement. Employees want to know whether they are saving enough and expect their employers to provide more hands-on advice and better contributions.
If employers choose not to invest in their employees’ future, they could see themselves losing top talent to competitors willing to provide better workplace pension provisions.