Small and medium sized businesses are being urged to increase employees’ pension participation, after statistics from the Department for Work and Pensions found that over a million workers are missing out on billions of pounds.
An estimated 803,000, around one in five, employees in companies with between five and 49 people are not saving into a workplace pension. It is the second successive year that a fifth of workers for employers of this size have not been contributing.
A further 374,000 employees at businesses with between 50 and 249 people are also not enrolled, taking the total to nearly 1.2 million.
Consultancy Broadstone said the figures suggest that employees at smaller organisations are falling through the cracks at a greater rate than among larger employers, possibly as a result of being less likely to have a plan in place to communicate the need to start saving for later life. Contribution rates at larger companies are far higher, with under one in 10 employees at businesses with more than 250 people not participating in a workplace pension.
Rachel Meadows, head of pensions and savings at Broadstone, said: “Boosting pension participation among colleagues is a key duty of employers in a post auto-enrolment environment as it is critical to protecting the long-term financial future of their colleagues. There is a benefit for smaller businesses too – it helps them attract and retain talent if workers know their employer is achieving best practice standards in line with bigger organisations.”
Meadows called upon employers to take steps to increase communications and provide sources of guidance on the benefits of pension saving.
Meadows added: “With pensions being one of the biggest employee benefit costs for employers, allocating a small extra spend on boosting staff knowledge can reap a big reward. This is the key to improving understanding, and therefore engagement and participation among employees and ultimately aligning participation rates with larger employers.”
