Employers are placing greater emphasis on supporting pension saving among younger and lower paid workers, as financial pressures continue to shape saving behaviour across the UK workforce.
That’s according to new research from People’s Pension highlights growing concern among SMEs about long term financial wellbeing and retirement readiness.
Nearly three quarters of employers, 74%, say they are worried that employees are not saving enough for retirement. This concern is particularly focused on younger workers and low earners, with 77% of employers identifying these groups as more exposed to financial strain and therefore more likely to reduce or stop contributions.
The findings suggest that day to day financial pressures are affecting how employees prioritise saving. As living costs remain a challenge, employers are increasingly aware that long term financial planning is being weighed against immediate needs.
Financial Pressure and Pension Engagement Challenges
Employers expect that younger workers are most likely to opt out of workplace pensions, with 32% identifying this group as the most at risk. Affordability is cited as the main driver, with 38% pointing to cost pressures as the primary reason for opting out.
However, financial constraints are not the only factor. Around 24% of employers highlight a lack of understanding, while 18% point to perceived value as contributing to disengagement. These findings suggest that awareness and communication play a significant role in shaping employee decisions.
Gaps in engagement remain evident. Nearly six in ten employers, 59%, believe employees do not fully understand the value of their pension. More than half, 52%, say employees are not making the most of the schemes available to them.
Employers also recognise a broader responsibility for financial wellbeing. More than four in five SME decision makers, 82%, say they feel responsible for supporting employees in this area, even as 75% report that rising business costs are limiting their ability to increase pay.
Communication and Support Key to Long Term Saving
Improving communication is identified as a key way to increase engagement. Nearly half of employers, 45%, say clearer information and education about pensions would help employees make more informed decisions. A further 40% highlight the need for additional support around financial wellbeing and retirement planning.
Stuart Reid, Distribution Director at People’s Partnership, said that helping people stay engaged with long-term saving has become even more important as many households face pressure on day-to-day finances.
“What this research highlights is the importance of communication and support in helping employees engage with their pension. Where understanding is lower, simple and accessible guidance can play an important role in helping people make informed decisions about their long-term finances,” he said.
“Even in a challenging environment, workplace pensions remain a key part of long-term financial planning. Supporting employees to stay engaged with saving, even at modest levels, can make a meaningful difference over time.”