Employers are concerned that ongoing financial pressure is prompting employees to make short-term trade-offs that could affect long-term retirement saving, according to research by People’s Pension.
According to the survey of 500 SME decision-makers, more than six in ten employers (62 per cent) fear more employees will opt out of workplace pensions due to financial pressure.
The latest labour market data by KPMG and REC, showed that, as of 23 February, rates of pay inflation remained below their long-run trends, and that engineering was the only sector to see an improvement in demand for permanent staff over the last month.
Almost two thirds of respondents (61 per cent) expected employees to reduce pension contributions to cope with day-to-day living costs. Nearly six in ten (59 per cent) say employees do not understand how valuable pensions are as part of their total reward.
However, almost half (49 per cent) of respondents admitted they do not communicate or promote their pension effectively.
Stuart Reid, distribution director at People’s Pension, said: “Employers are navigating a period where both businesses and households are under sustained financial pressure, and there is understandable concern about the impact this may have on long-term saving behaviour. What this research highlights is that affordability and understanding are closely linked.”
According to the survey, nearly six in ten employers (59 per cent) say employees do not fully understand the value of pensions as part of their total reward package, while more than half (52 per cent) are concerned employees are not engaged or getting the most out of the pension available to them.
Employers in wholesale, retail and franchising (68 per cent) and construction (64 per cent) were more likely to say employees are struggling to maintain pension contributions, increasing the likelihood of reduced saving or opt-outs.