Workplace pensions: How much is enough?

Advice and guidance remain underused

Just over a quarter (27%) of employees with a workplace pension sought advice or guidance in the last year, while more than half (52%) have never done so. The likelihood of people seeking advice increases significantly with income – with 15% at £20,000-£29,999 to 55% among those earning £200,000 or more seeking advice in the last year.

Advice is associated with action

Those who take financial advice are more likely to switch pension investments, make one-off contributions or transfer.

Awareness of investments is limited without professional input

Employees who use a financial adviser to check their workplace pension savings are far more likely to know where their pension contributions are invested; 70% compared to just 39% who rely on their yearly statement for this information. Those using their pension provider’s app were also more likely to know about their investments (65%), compared to those who use an online portal to check (49%).

Pension engagement is getting more regular

Employee engagement is on the rise with 72% of employees with a workplace pension now checking their pension at least once a year. Regular engagement is strongly linked to better savings outcomes.

Employer benefits are often overlooked or misunderstood

Only 37% of employees are taking advantage of employer matching, with a further 17% offered it but not using it. A similar pattern appears for salary exchange: 23% use it and 32% say it’s not offered. This highlights the role for advisers in helping employers and members understand available benefits.

Contribution levels remain below recommended levels

Despite widespread participation, average employee contributions (4.8%) remain below the recommended 5% minimum. Worryingly, 46% of employees contribute less than 4% of their salary and 13% of employees are unaware of their current contribution level, but it’s positive that 7% report contributing 10% or more of their salary.

Barriers remain with pension transfers

Of the employees who have had more than one job paying £10,000 or more in their lifetime, 37% have transferred a workplace pension at some point, however nearly six in ten (59%) have never done this. Reasons for not transferring include - not knowing how to start (16%), not realising it was possible (15%), wishing to consult an adviser (13%) and finding the process complex (12%). Clear communication could help employees take more confident action.

Awareness of Retirement Living Standards (RLS) is low

Overall, employees believe they’ll need an average of £58,300 a year for a good standard of living in retirement, around twice the actual average of £32,500. This may be because only 31% of employees understand the Retirement Living Standards.