Mintago’s latest research into employer and employee attitudes towards workplace pension schemes has revealed some interesting findings. Many employees do not feel that their employers provide adequate workplace pension support, suggesting a lack of understanding when it comes to the scheme and what it entails.
The research conducted into this topic involved questioning 365 senior decision-makers within leading UK businesses on how they are managing their employee benefits schemes, namely workplace pensions. Mintago also surveyed 436 UK adults, all in full-time employment and aged between 18 and 34.
What is a workplace pension scheme?
A workplace pension scheme is arranged by an employer and is a legal requirement for all UK workplaces. Contributions are taken directly from an employee’s wages and are paid into their pension. Employers are also legally obliged to contribute to their employees’ workplace pension. Employees must contribute 5% of their qualifying earnings and employers must contribute 3% of this figure. The government provides tax relief on workplace pension contributions. If an employee earns more than £10,000 per year and is aged between 22 and the current state pension age, they will be automatically enrolled into their employer’s workplace pension scheme.
How are employees affected by employer management of workplace pension schemes?
Financial anxiety and Millennials
Mintago’s research revealed that over a third of millennials believe that financial anxiety is hindering their job performance. This relates to the idea that employees’ financial situations can have a large impact on their mental health and productivity. Individuals who are concerned about their financial health are likely to lack concentration at work and be preoccupied with worrying about how to solve their problems. Financial anxiety amongst employees can lead to high levels of employee absenteeism, with this costing businesses money and eventually impacting overall productivity.
A lack of pension knowledge amongst employees
A lack of pension knowledge amongst employees causes significant financial stress. Knowledge is said to be power, and a lack of understanding of their workplace pension scheme is likely to see many people feeling anxious about the health of their pension fund. If pension education is valued within workplaces, employees can take an active role in managing their pension contributions, adjusting these according to their retirement wishes and financial situation. 40% of employees claim that a lack of knowledge regarding pensions is causing them significant stress. Many employees do not know where to go for reliable pensions advice that is easy to digest.
Financial anxiety and job performance
When it comes to various age brackets, 36% of 18-34-year-olds stated that they believe their financial situation negatively impacts their job performance. This is compared to 18% of 35-54-year-olds and 9% of those 55 and over. Those aged 18-34 should be helped to improve their financial situation because contributing to a pension fund as early as possible reduces the percentage contribution that individuals need to make each year to reach their retirement goals. Furthermore, having control of their pension situation as soon as possible will reduce the amount of stress felt by employees. Those who are older when they begin to contribute and understand their financial situation are likely to experience feelings of panic and anxiety, with these emotions hindering their job performance.
Understanding of pension schemes
54% of millennials find pension savings to be daunting. This is likely to be due to a lack of understanding of pension schemes. Millennials should be educated by their employer on where their pension contributions are going, and how varying levels of contributions will affect their future retirement lifestyle. Many employees are unaware of their pension savings and as a result, do not know how to improve their pension wellbeing. 66% of employees admit to not checking their pension savings regularly. Therefore, they may lose track of how much they have saved and may even be unaware of how much of their qualifying earnings they are contributing. 46% of employees do not know how many pensions they have in total. As a result of this, money is left on the table and many pension funds are lost. Research shows that UK workers have lost over £19 billion in forgotten pensions. This is money that could significantly improve their retirement lifestyle. Mintago’s pension hunter feature can be used to track down employees’ lost pension pots to increase the overall value of their pension fund.
Evaluating employee pension savings
53% of employees do not know how much they have saved into their pension. If they have not saved enough to reach their retirement goals, they may incur a shock when they eventually check on the value of their funds. Employees should be encouraged to regularly evaluate their pension savings to avoid panic and disappointment. 51% of employees do not know how much they pay into their pension each month. This reflects a lack of understanding of how important a pension is when it comes to evaluating your overall financial situation.
Workplace pensions: An important workplace benefit
Despite the statistics above showing a lack of pension understanding, evidence suggests that workplace pensions are still seen as a significant workplace benefit. 60% of employees would engage more with their pension if it was easier to check in on savings and adjust their contributions. 48% of employees consider their workplace pension to be a significant workplace benefit and 55% want their employer to do more to improve engagement with their workplace pension scheme. This demonstrates the clear desire amongst employees to improve their pension knowledge and shows the important role of employers in changing the narrative around workplace pensions. Mintago’s platform makes it easy for employees to check their pension savings and adjust their contributions, therefore directly encouraging them to take more control. Employers can promote resources that explain how workplace pension schemes operate and why they are important.
Employer attitudes towards workplace pension schemes
Mintago’s research shows that the majority of UK businesses are failing to offer employees adequate workplace pension support. One of the issues is the lack of discussion instigated by employers in the workplace. 60% of decision-makers do not think that their organisation provides adequate support to help employees better understand their workplace pension scheme. 36% of UK managers said that their business uses auto-enrollment without providing any further pension guidance to employees. Employees may find themselves being automatically included in their workplace pension scheme without understanding how much they are contributing and how this will affect their retirement outlook. This is concerning because some employees may not be contributing enough to their pension to achieve their retirement goals. If this is not rectified quickly, they may find that they are too close to retirement to make any positive changes. 48% of UK managers claim that there is little internal discussion of employee pensions or the scheme that the business offers. This could mislead employees into thinking that their pension situations are a taboo topic that should not be discussed. Instead, employers should be transparent with employees to ensure that they are fully aware of their pension and the scheme that is offered to them.
Although 43% of organisations regularly review their employee benefits strategy, only a small number actually listen to employees’ benefits preferences. The practice of reviewing employee benefits practices is somewhat futile if employees’ ideas are not listened to and acted upon. After all, employees are the core of any organisation. Only 35% of organisations speak with their employees to understand which benefits and perks best suit their needs. There is clearly a need for more open workplace discussions within many organisations. 28% of UK managers claim that their business prioritises other workplace benefits above pensions, revealing how more needs to be done to educate businesses on the importance of pensions when it comes to employees’ quality of life.