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

01/03/2022

There are more than 2 million pensioners living in poverty in the UK. Unfortunately, old-age poverty is a very real problem.

The auto-enrolment pension scheme was introduced in 2012 to help tackle this problem, and it has made a difference. However, despite more employees saving towards their future, many still run the risk of an uncomfortable retirement.

Part of this could be down to a simple lack of understanding. In the Drewberry™ 2022 Workplace Pension Survey, we found that 41% of respondents didn’t understand their workplace pension and 48% didn’t understand their pension’s tax relief benefits.

Majority Of UK Employees Are Saving Into A Workplace Pension But It’s Not Enough

In our survey of 1,000 working adults, we found that 87% of employees are currently contributing into a workplace pension.

This is great news, but not really surprising since auto-enrolment made it a legal obligation for employers to enrol all eligible staff.

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

Compare Top 10 UK Providers

Takes approx. 60 seconds
Verified by Norton Symantec icon
 Or Call Us

Contact Us

Head Office & Pensions and Investments
Senator House
85 Queen Victoria Street
London
EC4V 4AB
Personal Insurance & Accounts Payable
Telecom House
125-135 Preston Road
Brighton
BN1 6AF
Drewberry London Office MapDrewberry Brighton Office Map

If you are unhappy with our service, we have a complaints procedure, details of which are available upon request. If you are unhappy with how your complaint has been dealt with, you may be able to refer your complaint to the Financial Ombudsman Service (FOS). The FOS website is www.financial-ombudsman.org.uk.

Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.

Drewberry™ uses cookies to offer you the best experience online. By continuing to use our website you agree to the use of cookies. If you would like to know more about cookies and how to manage them please view our privacycookie policy.