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Employers poised to help raise pension awareness

Employers poised to help raise pension awareness

Category: Pensions

Updated: 12/09/2011
First Published: 12/09/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Employers have been told they have a critical role to play in making sure employees are saving enough for their retirement.

A new survey into workplace pensions has revealed that only just over half (55%) of workers already in a defined contribution pension scheme know what they contribute.

It is a figure that the authors of the report, Scottish Widows, say is a clear sign that encouraging adequate pension contributions remains a challenge.

Although almost three-quarters (73%) of non-retired people have a private pension, the research found that a significant proportion are uncertain about what it will provide them.

Over a quarter (28%) did not know how much, or even if, they are contributing to their workplace pension scheme, while more than a third (38%) have no idea how much their employer contributes.

Scottish Widows said this lack of understanding of how much is being saved is potentially leaving employees with unrealistic expectations of what this will provide them at retirement.

But while employees may not fully understand their pension scheme, over half (56%) see it as a reason to stay with their current employer, and consider the pension offered by a prospective new employer before bonus potential, flexitime, a company car and overtime pay.

Pete Glancy, Head of Corporate Pension Propositions at Scottish Widows, said the research showed there was
a gap in financial education about pensions and other benefits in the workplace and that many employees expect a lot more from their employer than just access to a pension scheme.

"More advice and guidance is needed, not only to increase the number of people who are not saving, but also to ensure that those who are contributing are making the most of their benefits," he added.

"In many cases, these benefits are unappreciated and not understood. With the appropriate support their retirement years can be transformed at very little personal cost."

The survey comes as businesses should be readying themselves for the introduction of auto enrolment into workplace pensions, a new regime which will begin to be phased in from next year.

Under the scheme, employees will be automatically signed up to a pension provided by their employer, or into NEST, the state-supported alternative.

By October 2017, minimum contributions into the scheme must be 8% of employee earnings, with a minimum of 3% coming from the employer plus 4% from the employee and 1% by way of tax relief.

It is hoped the fact that workers will be automatically enrolled will help to boost the numbers saving into a pension, although the option to opt out will be available.

"Auto-enrolment is just around the corner and could give employee savings an enormous boost," added Mr Glancy.

"The level of success will depend on the effectiveness of the employee engagement in the workplace.

"Employee engagement is at its most effective when it is personalised to the needs and aspirations of individual employees."

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