Half (50%) of UK workers would pay more into their workplace pension if their employer paid a larger share, Scottish Widows’ latest research shows.
The firm’s Retirement Report revealed that if minimum contribution rates were to rise in the future, more than one in three (34%) permanent workers would be willing to contribute 6-8% of their salary and a fifth (20%) would be happy to contribute 8-10%.
Scottish Widows estimates that increasing total contribution rates from 8% to 12% on the first £30,000 of salaries could boost projected retirement pots by an average of £40,000.
Two-thirds (66%) of permanent workers are in favour of the Government raising minimum employer pension contributions compared to 42% when it comes to raising employee contributions.
Younger workers in their 20s are most supportive of an employer increase (68%), but appetite also remains strong as workers get closer to retirement, with 61% of over 50s in support.
Despite this, Scottish Widows said cost pressures are hindering firms from boosting reward and benefit packages. More than half (54%) of firms are held back from increasing contributions by financial constraints including operating, staffing and utility costs.
Graeme Bold, managing director, workplace and intermediary wealth at Scottish Widows, said: “Automatic enrolment has been a real game changer for how Britain is building pension wealth, bringing millions of people into pensions who wouldn’t have saved otherwise. But the next phase is a challenge, as while half of workers are ready to put more aside if their employer steps up too, but businesses are already up against financial pressure across the board.
“The reality remains that too many people are still at risk of falling short in later life, with around a third facing a financial struggle in retirement.”
Separately, the report found that understanding and engagement with retirement savings remains low, with 41% of workers having no idea how much they contribute each month. A fifth (19%) believe their employer contributes nothing, while 30% admit they don’t understand how pensions work.
More than a third (36%) don’t know how much they should be saving and around a quarter (26%) are unsure of what to do with their money.
Furthermore, low confidence is also a concern, says Scottish Widows. Two in five (42%) lack the confidence to manage their retirement savings and just over a half (52%) have done little to no research into how much they will need for retirement.
Bold added: “Industry, government, employers and all of us need to be in the game here to help people build better financial futures. Increasing default contributions from employers and employees will be a big part of making this happen, but people must also understand what they have, if it’s enough and what steps they can take to plug any shortfall over time.”
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