Several pieces of research published in April and May have drawn attention to the disparity between employees’ retirement expectations and the actual size of their pension pot.
For example, more than half (53%) of the respondents to Aon Hewitt’s Global benefits attitudes survey admitted they needed to save more for their retirement, while 90% of UK employees who responded to the Aegon UK Readiness report said they are falling short of their retirement targets.
Meanwhile, more than a quarter (28%) of respondents who save into a workplace defined contribution (DC) pension scheme have no idea how much is in their pension pot, according to research by Capita Employee Benefits.
Although auto-enrolment has paved the way for a move towards greater personal responsibility around employees’ retirement outcomes, employers still have a lot to do.
Sue Pemberton, head of DC and wealth at Buck Consultants, said: “While auto-enrolment is a great idea, the level of contributions that have been put in place are clearly inadequate.
“There is a massive job to try to help people understand that the contribution levels are not sufficient to provide them with the sort of retirement they are probably expecting.”
Employers can help staff by giving them the option to sign up for automatic pension contribution increases or adding a salary sacrifice arrangement to the pension scheme.
Polycom added salary sacrifice to its group personal pension scheme to coincide with auto-enrolment on 1 May. The technology organisation is using the tax and national insurance savings from salary sacrifice to help fund the cost of compliance with the legislation, but it also intends to give savings back to staff in the form of pension contributions.
Pemberton added: “If an organisation can afford to rebate its savings, that makes pensions salary sacrifice even better for employees.”
The pension reforms announced in the government’s 2014 Budget, which give employees more choice and flexibility about how they take their retirement income, also gives employers an opportunity to drive home the message of how important it is for staff to take responsibility for their own savings choices.
However, more than a third (35%) of respondents nearing retirement were not aware of, or were unsure about, the pension changes announced in the Budget, according to research by MetLife in May.
Dominic Grinstead, managing director, UK at MetLife, said: “The Budget demonstrates the need for much more personal responsibility throughout the employee’s life. It creates much less uncertainty in the post-retirement journey.”
And research published by the National Association of Pension Funds (NAPF) found that 28% of UK workers are more likely to start saving or save more into a pension scheme because of the Budget reforms.
Pemberton added: “Pensions will improve as a result of the Budget changes, because people will hopefully start to see pensions as more of a savings vehicle, rather than something that is unattainable.
“We are hoping that is going to have a positive impact on the way people view pensions.”
- 53% of respondents admitted they need to save more for retirement, according to research by Aon Hewitt.
- 28% of respondents who save into a workplace DC pension scheme have no idea how much is in their pot, according to research by Capita Employee Benefits.
- 90% of respondents are falling short of their retirement targets, according to research by Aegon UK.
- 28% of respondents are more likely to start saving or save more into a pension scheme following the Budget’s pension reforms, according to research by the NAPF.
- 35% of respondents near retirement are not aware of the pension changes announced in the Budget, according to research by MetLife.
- 62% of respondents believe giving employees more choice and flexibility about how they take their retirement income is a good idea, according to research by Aviva.