A majority, or 90 per cent, of SME employees report that their employers have not encouraged them to boost their workplace pension contributions for improved retirement benefits, according to Howden Employee Benefits.
According to Howden’s ‘SME Workplace Pensions and Benefits Research Report’, based on a survey of 500 SME employers and 500 SME employees, a substantial number of these businesses are failing to fully maximise the benefits of employee workplace pensions, leaving potential retirement savings untapped.
The report finds that many employees make the minimum contribution to their employer pension because they wrongly think that will be enough to support them comfortably in retirement, which could jeopardise their retirement plans.
The survey showed that 24 per cent of companies never assess the cost-effectiveness of their pension plans and 28 per cent only do so sporadically. Additionally, 56 per cent of SMEs have not evaluated if their default pension funds are appropriate for all of their employees, ignoring differences in financial situations, risk tolerance, and retirement timeframes among their workforce.
Meanwhile, 68 per cent of employees are unaware of possible national insurance savings, while 63 per cent of employers are aware of potential salary sacrifice savings. Furthermore, just 50 per cent of employees rated workplace pensions as the most valuable perk, while 48 per cent of SME employers agreed. However, despite being regarded as the most valued employee benefit by 48 per cent of SME leaders, 42 per cent of SMEs lose out on a recruitment advantage by not promoting workplace pensions as part of the hiring process.
Howden Employee Benefits & Wellbeing executive director SME Mark Fosh says: “As financial stress continues to rise, many employers are taking steps to look after employees’ financial wellbeing, including providing them with better workplace pensions.
“However, SMEs may be missing a trick in terms of making the most out of pension opportunities for their business, employees, and potential new hires. Common mistakes include failing to encourage employees to increase their pension contributions, not educating them about salary sacrifice or promoting the scheme to attract new talent.
“Employers who offer good quality workplace pension schemes should be boasting about them, as well as ensuring the scheme is well governed and compliant. This includes re-enrolling employees and communicating all the benefits of the scheme, as well as explaining the various salary sacrifice options.
“Salary sacrifice schemes can be an effective way for employers to help encourage pension saving and support their employees’ retirement planning by redirecting some or all their National Insurance (NI) savings into their employees’ pension pots – and it doesn’t have to be complicated.
“In our experience, SMEs want to do the very best for their employees and understand the part that workplace pensions can play, but senior executives can be time poor and often don’t have the capacity to be on top of every aspect of a fast-moving market.
“During Pension Awareness Week, we encourage SMEs to download our free report which outlines the key points from our survey and how workplace pension schemes can work as hard as possible for everyone.”
