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Over a quarter (28 percent) don't know how much, or even if, they are contributing to their DC scheme
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Only 55 percent of those with a Defined Contribution (DC) scheme know what they are contributing, while the other 45% are either contributing nothing or do not know how much they are contributing
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38 percent have no idea how much their employer contributes to their DC scheme
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However, 70 percent expect their employer to provide access to a pension scheme and make contributions
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40 percent feel their employer should offer full financial advice, while 55 percent seek general information about retirement planning from their employer
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56 percent of employees say their employer's pensions scheme is an incentive to remain with that employer
The Scottish Widows Workplace Pensions Report 2011 reveals that positioning the workplace pension as ‘deferred pay' could help improve employee engagement and increase awareness of pension benefits. Only 55 percent of those already in a Defined Contribution (DC) scheme know what they contribute, a clear sign that encouraging adequate contributions remains a challenge.
Almost three-quarters (73 percent) of non-retired people have a private pension, yet a significant proportion are uncertain about what it will provide them. Over a quarter (28 percent) don't know how much, or even if, they are contributing to their workplace pension scheme, and 38 percent have no idea how much their employer contributes. This lack of understanding of how much is being saved is potentially leaving employees with unrealistic expectations of what this will provide them at retirement.
But while employees may not fully understand their pension scheme, 56 percent see it as a reason to stay with their current employer, and consider the pension offered by a prospective new employer before bonus potential, flexitime, a company car and overtime pay.
Pete Glancy, Head of Corporate Pension Propositions at Scottish Widows, comments: "It is clear that there is a gap in financial education about pensions and other benefits in the workplace and many employees expect a lot more from their employer than just access to a pension scheme.
"More advice and guidance is needed, not only to increase the number of people who are not saving, but also to ensure that those who are contributing are making the most of their benefits. In many cases, these benefits are unappreciated and not understood. With the appropriate support their retirement years can be transformed at very little personal cost"
Employers have a critical role to play in encouraging retirement saving. 70 percent want their employer to not only provide a pensions scheme but also make contributions. And when asked what support they want, 40 percent of employees wanted their employer to provide full financial advice, while 55 percent want general information and guidance.
Glancy continues: "Often pensions are seen as too complicated yet the messages could be quite simple. Positioning a company pension as ‘deferred pay' could increase appreciation to the value of this benefit."
For those without a pension, the introduction of auto-enrolment and NEST will help improve the savings landscape, particularly for those working for smaller businesses who may not have access to a pension currently. However, 75 percent say they will save under £50 per month, which is significantly less than the amount required for a comfortable retirement.
Glancy continues: "Auto-enrolment is just around the corner and could give employee savings an enormous boost. The level of success will depend on the effectiveness of the employee engagement in the workplace. Employee engagement is at its most effective when it is personalised to the needs and aspirations of individual employees."
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