Employers are concerned that ongoing financial pressure is prompting employees to make short-term trade-offs that could affect long-term retirement saving, according to new research from People’s Pension.
More than six in ten (62%) employers say they are worried that financial pressure will lead to more employees opting out of workplace pensions. A similar number (61%) expect staff to reduce contributions as they prioritise day-to-day living costs.
The research also uncovered a lack of awareness around pensions which is impacting employees’ approach to retirement saving. Nearly six in 10 (59%) employers say employees do not fully understand the value of pensions as part of their total reward package, while more than half (52%) are concerned employees are not engaged or getting the most out of the pension available to them.
Almost half (49%) admit they do not communicate or promote their workplace pension effectively within their organisation.
The concerns come amid ongoing industry discussion about contribution adequacy and fears that the 8% auto-enrolment minimum on its own is unlikely to deliver the level of retirement income many savers expect.
Despite these challenges, People’s Pension said many employers continue to recognise a broader responsibility. More than four in five (82%) SME decision makers say they feel responsible for their employees’ overall financial wellbeing, even as 75% acknowledge that rising business costs limit how much they can increase pay.
Employers most commonly said clearer communication and education about pensions (45%) would help to improve pension engagement, alongside additional support for financial wellbeing and retirement planning (40%).
Stuart Reid, distribution director at People’s Pension, said: “Employers are navigating a period where both businesses and households are under sustained financial pressure, and there is understandable concern about the impact this may have on long-term saving behaviour.
“Even short breaks or reductions in pension contributions can have a disproportionate effect over time. When saving stops, people miss out not only on their own contributions but on employer payments and years of compounded growth – losses that are hard to rebuild.”
Reid said employers can make a “real difference” by clearly explaining the value of employer contributions, highlighting the long-term impact of even small increases in saving, and offering simple guidance that helps employees balance short-term financial pressures with future retirement needs.
“Clear, consistent communication, particularly at key moments such as pay reviews or major life events, is crucial to keeping retirement saving on track,” he added.
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