Workplace pension engagement gaps highlight need for greater awareness

The workplace pension, second only to your salary, is the most important benefit that a place of work provides. 

So, when auto-enrolment was introduced in 2012, it was celebrated for streamlining the process of saving for retirement – under auto-enrolment, UK employers are required by law to set up a workplace pension, enrol all eligible employees, and contribute to their pension pot. Now, employees could contribute to their pension without so much as an afterthought.

Auto-enrolment has essentially levelled the playing field when it comes to retirement planning. Indeed, since 2012, over 10.6 million workers across all age brackets, occupations and income levels, have been enrolled in workplace pensions.

However, despite its success, auto-enrolment lead to an issue underlining issue of ‘out of sight, out of mind”. This means that, once a person is enrolled in their workplace pension scheme, they don’t have to think about it again until they reach retirement.

If people don’t check in with their pension, it could mean they are unknowingly under saving for retirement.

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This begs the question: what could drive this lack of engagement and, more importantly, what can be done to resolve the issue? Keen to explore this further, the team at My Pension Expert commissioned an independent survey of 2,000 UK adults.

Low engagement

It’s not just a working hypothesis that people are not engaging with their pension. Our research shows that 27% of UK adults with a workplace pension either haven’t checked it in the past year (11%) or have never checked it at all (16%).

Although auto-enrolment may have played a role in this trend, other factors can also contribute to low pension engagement. For instance, the UK has a track record of poor pension engagement, and indeed comprehension of the importance of saving for retirement.

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When it comes to contributions, 38% contribute between only 8% (the minimum) and 10% of their monthly salary into their workplace pension (when combining theirs and their employer’s contributions). Further, around one-in-eight (12%) people don’t actually know whether they have a workplace pension or how much they contribute to it.

Yet, despite the lack of engagement and many only making the minimum contributions, most (59%) UK adults with a workplace pension say they will rely on it to fund their retirement. 

Many argue that the onus should – at least in part – be on employers to do more to address this lack of engagement. Most of the respondents (59%) want to see their employer do more to help them understand and engage with their workplace pension – an issue that I recently spoke to HR Magazine about:

“Financial wellbeing, once overlooked, is gaining recognition among businesses and HR teams for its impact on employee welfare, resilience, retention, talent acquisition, and cost reduction.

Enabling flexible retirement options is integral to this renewed focus on financial wellbeing. As the cost-of-living crisis persists and the state pension age rises, it’s crucial for HR professionals to be equipped to offer the right support.

“Enhancing educational resources and fostering open dialogues in the workplace about retirement planning are important steps. However, the real value emerges when employers facilitate access to independent financial advisers. Whether funding, discounting, or providing a list of potential advisers, this support helps employees navigate complex financial matters, offering personalized assistance crucial for improving retirement outcomes.”

Read the full article here.

Education is power

Auto-enrolment has undoubtedly played a pivotal role in kickstarting the retirement savings journey for many Britons. Yet, our research illuminates the need for a broader and more comprehensive approach to financial education.

Whilst employers must recognise their responsibility for their employees future financial wellbeing, there is argument to suggest that the government could provide mechanisms to allow them to provide greater support. There is certainly scope for both parties to work together to offer financial education and accessible pension monitoring tools.

A good starting point would be ensuring their teams know how to access the help they need. Pointing them in the direction of accessible, affordably independent financial advice, for example, could be a good starting point.

For example, our team of advisers at My Pension Expert, will take into account a person’s individual circumstances and their future goals, to develop a tailored retirement plan to suit their needs. For employees, this could be vital in helping them to understand how much they have saved, and the steps needed to help them achieve the retirement they want.

The UK has revolutionised retirement saving with auto-enrolment. However, we must not be idle – there is clearly an issue with pension engagement and understanding. As such, employers would be wise to explore the tools available to give employees as much support as they possibly can. And granting access to independent financial advice could be a brilliant starting point for many employees on their journey to the retirement they want.