Almost nine in ten UK employees say their workplace pension influences whether they stay with their current employer, but employers treated pensions as a compliance exercise rather than as a strategic element of employee wellbeing, according to new research from workplace pension provider Penfold.
The data is drawn from Penfold’s Retirement Reality Check report, based on surveys of 2,000 UK employees and 500 small and medium-sized businesses. The findings underline the growing importance of pensions in recruitment and retention at a time when employers are under increasing pressure to demonstrate value through their benefits strategy.
The research suggests that more than half of SMEs, or 53.6 per cent, contribute only the statutory minimum, and fewer than one in seven or 14 per cent, offer matched contributions. At the same time, 47 per cent of employees say their own pension contributions are set at the legal minimum, raising concerns that millions remain at risk of under-saving for retirement.
The report highlights a clear disconnect between the importance employees place on pensions and the level of focus many employers give them within their wider benefits offering.
More than half of employees, or 57 per cent, say a pension is ‘very important’ when deciding whether to join a new employer, ranking it above any other workplace benefit. Employer contribution levels also appear to fall short of expectations, as 95 per cent of employees say a contribution of between 3 and 4 per cent would not be sufficient to encourage them to stay.
The research suggests there is significant scope to increase overall savings, as 53 per cent of employees say they would increase their own pension contributions to an average of around 12 per cent of salary if their employer matched what they paid in.
Penfold CEO and co-founder Chris Eastwood says: “Employers are already paying for one of the most powerful tools they have to support morale and retention, but many underestimate its impact.
“At a time of rising living costs and economic uncertainty, employees are thinking much more carefully about their financial security. For many, their workplace pension is a signal of how seriously their employer takes their long-term wellbeing – not just today, but in the future. Yet for employers, this still sits firmly in the background, being viewed as a compliance requirement; important, but largely fixed.
“Our research shows that pensions influence how secure, committed and supported people feel at work, even if they’re not talked about day to day. That makes them one of the most important, and underused, tools employers already have.”
Eastwood adds: “This isn’t just about retirement planning. Financial confidence plays a huge role in wellbeing and morale at work today. Yet more than half of employees don’t know the current value of their pension pot, and many don’t fully understand how their scheme works.
“Employers don’t need to become pension experts, but they do have an opportunity to make pensions clearer, more visible and more meaningful for their teams. Even without increasing contributions overnight, better communication and modern pension experiences can significantly increase the value employees feel they’re getting.
“When employees feel confident about their financial future, they’re more likely to stay, engage and commit. A better workplace pension strengthens retention without requiring a complete overhaul of existing benefits.”