UK employers should be more open and honest about the challenges staff are facing when it comes to building up adequate pensions savings.
96% of workers believe that employers should be more transparent with employees about pension shortfalls and the realities of retirement today, and 68% feel that their employer could do more to encourage them to maximise their pension contributions.
New research from the Atlas Master Trust (part of Capita) exploring the reasons for continued low engagement levels in pensions, reveals that almost three quarters (72%) of employees admit that they are not actively engaged with their workplace pension, and more than a quarter (28%) admit that they never review their pension and try not to think about it at all. Only 6% of workers consider themselves to be very engaged with their pension, regularly reviewing it and considering their investment options.
The study – amongst 200 pensions managers, 200 senior finance professionals, 100 senior HR professionals and more than 2,000 employees – reveals that the consequence of this lack of engagement is that more than three quarters (77%) of employees don’t understand enough about pensions to make considered decisions.
Alarmingly, the majority (60%) of employees believe that minimum contribution levels for auto-enrolment workplace pension schemes represent the amount that the Government recommends to achieve enough retirement income. And a quarter (25%) of the workforce claim that they ‘will probably just rely on a state pension’ for their retirement.
Corresponding research amongst HR and finance leaders shows employers are increasingly aware of the need to take a more open and direct approach to pensions. 90% of HR leaders and 81% of finance leaders believe they need to be more transparent about savings shortfalls in their pension communications to members. Only 39% of HR leaders claim to be very satisfied with their efforts to drive engagement, dropping to 33% amongst finance leaders.
Roz Watson, Head of Engagement, Atlas Master Trust, said: “Employees are calling for a more pragmatic and honest approach from their employers when it comes to pensions – one that is based around the ‘Three Ts’ – transparency, training and tools. There needs to be a clear separation between engagement and member communications. Too many employers are focusing their engagement efforts on increasing visits to a website or downloads of an app. Real engagement is about driving genuine awareness and knowledge of pensions, empowering members to make proactive and informed decisions and to understand the implications of these decisions.”
The research reveals that most (61%) of employees find pensions confusing, 59% don’t know how much they should be putting into a pension and 74% don’t understand the differences between different pensions arrangements (such as Defined Contribution, Defined Benefits and Master Trusts).
Most employees (60%) do not have a specific retirement goal, in terms of when they would like to retire and how much money they would like to have saved by that time, and more than a third (34%) of employees admit to having no idea about the current value of their workplace pension.
Encouragingly, despite the challenges of getting employees to show more interest in pensions, employers remain committed to improving understanding of pensions. 91% of HR and finance leaders and 93% of pensions professionals acknowledge that employers have a responsibility to provide more financial education to employees.
84% of employees want a better understanding of how much more they need to save in their pension to have a comfortable retirement and more than three quarters (77%) would like to see examples of what other people like them are doing with their pensions.
Roz Watson concluded: “These findings demonstrate why driving a better general understanding and knowledge around pensions is so critical, to ensure people feel empowered to make informed decisions, based on all of the options available to them, and in control of their own future. This means a new approach to engagement, one that is highly targeted around education, access and honest dialogue. Too many employees are being turned off by uninspiring communications that they feel don’t reflect their needs or personal situation.”
The full research findings can be found in the white paper, ‘Why engagement needs a reality check’, available for download here.