10th June 2019
A Pensions Policy Institute (PPI) report recently outlined that there may be 12 million individuals who are under-saving for their retirement.
WEALTH at work, a specialist provider of financial education and guidance in the workplace supported by regulated advice for individuals, believes there are many company pension schemes which offer generous pension benefits, which are not always understood by individuals.
Currently under ‘auto-enrolment’ rules, employers must pay in a minimum of 3% of their employees qualifying salary into a workplace pension, and employees pay in a minimum of 5%, totalling 8% overall. One of the key benefits not realised by individuals is that many employers will offer larger pension contributions above the required 3%, if employees also pay extra money into their pension. However, some individuals are either not aware of this ‘free’ extra money from their employer, or indeed don’t understand how much they should be saving into their pension in the first place to secure a better income in retirement.
Jonathan Watts-Lay, Director, WEALTH at work, comments;
“Pensions may not be the most engaging or exciting of topics for many, but much more needs to be done to persuade individuals to save more for retirement, and help them to understand what help is available.”
He adds; “Whilst auto enrolment has been a great start in getting more individuals to save into a pension for the first time, some people may believe that the current contribution rate of 8% is the ‘right’ amount and not consider paying more. Our experience is that there are many pension schemes where employers offer very generous pension contributions, and individuals could take advantage of more ‘free money’ from their employer through matched contributions. In other words, if the individual pays more into their pension, so will their employer.”
Watts-Lay asks; “But what can be done to help individuals understand the benefits of saving into a pension and to encourage them to pay more than the minimum?”
He explains; “Financial education plays a fundamental role in this. We have educated hundreds of thousands of employees about what they will be able to afford in their retirement, the benefits of paying into a pension, and the value of contributing as much and as early as possible, which helps them to realise how valuable workplace pensions are and how to make the most of them.
Some of this information may be available on company websites or benefits portals, but actually having someone to speak to about pensions, and explain how it is possible to have an adequate income in retirement, is far more engaging. In fact, some of the UK’s leading employers use classroom based seminars to educate their employees about pensions. Once clearly explained to someone, there are few individuals who do not take an interest.”
Watts-Lay adds; “I urge all employees to speak to their workplace to find out what support they provide.”