We’re in the Dark: 41% Of UK Employees Don’t Understand Workplace Pensions

Employees Don’t Understand Workplace Pensions

What is surprising is the general lack of understanding employees seem to have about workplace pensions.

28% of respondents disagreed when asked, ‘Do you feel you have a good understanding of your employers workplace pension provision?’

Nearly 1 In 2 Employees Don’t Understand Tax Relief or Salary Sacrifice

A large number of employees also don’t understand what pension tax relief or salary sacrifice is.

• 48% of employees don’t understand tax relief
• 48% of employees don’t understand salary sacrifice/salary exchange

Tax relief is one of the major benefits of workplace pensions. If employees do not understand it, they could be missing out on the opportunity to boost their savings.

Employees Don’t Know How Much Is Being Contributed Into Their Workplace Pension

Alarmingly, employees also don’t know how much they are saving into their pension.

41% of respondents said they don’t know what percentage of their employed earnings they contribute each month.

Employers Contribute Thousands and Employees Unaware

Another 41% said they also don’t know how much their employer contributes each month.

Employees Don’t Know if They Are Saving Enough

It’s impossible for employees to know if they are saving enough for retirement if they don’t know what is being contributed or the tax relief they are entitled to.

With this in mind, it’s not surprising that when asked, ‘Do you feel you contribute enough to your workplace pension?’ 24% of respondents disagreed, and another 10% said they weren’t sure.

More Needs To Be Done To Help Employees Understand Workplace Pensions

Antoine de Saint-Exupéry once said, ‘A goal without a plan is just a wish.’  This couldn’t be more true when it comes to retirement.

If employees don’t understand their workplace pensions or how much is being contributed, how can they plan for their retirement effectively? The answer is they can’t.

More needs to be done to educate staff to ensure that they have the right tools and knowledge to make informed decisions about their pensions.

Just increasing monthly contributions by 1% can have a significant effect on the health of someone’s pension pot. Not only because they will be saving more, but because their savings will be topped up with what is essentially ‘free money’ from the government.

In order to take advantage of this, employees need to understand workplace pensions and what their goals are for retirement.

If you need pension advice or want to discuss how to find the right group scheme for your employees, email help@drewberry.co.uk or call us today on 02074425880 and speak to one of our friendly expert advisers.

Danielle Hines
Employee Benefits Consultant at Drewberry