Reaping the benefits of workplace pension savings
Three years have passed since the introduction of auto enrolment, and employees are really starting to reap the benefits of workplace pension savings. New research has revealed that employer contributions are crucial to boosting pension savings for over half (54%) of those enrolled in a defined contribution pension scheme in the UK.
T he latest Scottish Widows’ Workplace Pensions Report found that since the introduction of auto enrolment within large- and medium-sized businesses, more than half (52%) of employees in medium-sized businesses are now saving adequately – up six percentage points in the past 12 months – while four in ten (39%) now feel optimistic about their long-term future, compared to 36% in 2014.
Key retirement income
The number of employees saving adequately in large businesses has leapt from 53% two years ago to 66%, as an increasing number look towards their workplace pension as a key retirement income.
Six out of ten workers in larger organisations said they will rely on a company pension for a reasonable standard of living in retirement, compared to 40% for employees working for medium businesses and just 32% for small businesses. There has been a marked increase on these figures across the board in the last 12 months, with the biggest increase – nine percentage points – seen amongst employees of large companies.
Considering a career move
The research found more than a third of medium-to-large business employees see workplace pension schemes as a major incentive when considering a career move. This suggests that in order to attract and retain talent, there is an increasing onus on employers to ensure their staff feel supported and understand the benefit of their workplace scheme.
With auto enrolment a significant driver behind the uplift in savings and positivity, smaller businesses yet to reach their staging dates are still significantly lagging behind. Just four in ten (40%) of employees of small businesses are saving adequately, while a third (30%) confess they are saving nothing at all towards retirement, compared to only 11% of those working for large businesses.
Financial education and support
While the findings demonstrate positive engagement with workplace savings amongst medium and large business employees, they also bring to light increasing pressure on employers to increase contributions and provide wider practical financial education and support.
More than a quarter (29%) of mid-sized organisations’ workers and almost a quarter (24%) of employees at the largest organisations think that employers should increase contributions by a little each year.
The Scottish Widows UK Workplace Pensions Report is based on an online sample of 5,191 UK adults conducted by YouGov between 31 March and 8 April 2015, and is one of the largest surveys into employee attitudes on pensions.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.