More than six in ten employers fear that mounting financial strains will push staff to opt out of workplace pensions, according to research from People’s Pension, which found 62% of employers expressing this concern and 61% expecting employees to lower their contribution levels. The survey highlights particular anxiety among small and medium-sized businesses, where 72% foresee reduced employee saving, at a time when inflation and living costs remain a key pressure on household budgets. According to the report by People’s Pension, sectors such as wholesale, retail and franchising, and construction report higher levels of strain on contributions.

Long-term impact and inequality risks

People’s Pension’s distribution director, Stuart Reid, framed the findings as part of a wider squeeze on both firms and households. "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," he said. He warned that even temporary breaks or lower pension payments can have a disproportionately adverse effect over the long term and pointed to their role in widening the gender pension gap where career breaks for childbirth and caregiving reduce retirement outcomes.

Engagement and communication challenges

The research also points to an engagement and knowledge problem: 59% of employers believe staff do not fully grasp the importance of pensions within their overall remuneration, while 52% flagged employee disengagement. At the same time nearly half of employers admit they do not effectively promote or communicate their workplace pension internally, a gap that employers themselves identify as limiting take-up and consistent saving.

The role of education and support

Employers identified clearer communication and education about pensions as the single most useful step to boost engagement, with 45% selecting it, and 40% saying extra support for financial wellbeing and retirement planning would help. More than four in five SME employers (82%) said they felt responsible for employees’ overall financial wellbeing, yet 75% acknowledged that rising business costs constrained their ability to raise pay. According to People’s Pension, these competing pressures make non-pay interventions such as financial education particularly important.

Employer responsibility and strategic messaging

Reid underlined the employer role in explaining the value of employer contributions and suggested timing messages around pay reviews and major life events to keep saving on course. "What this research highlights is that affordability and understanding are closely linked. Even short breaks or reductions in pension contributions can have a disproportionate effect over time," he said. He added that "Workplace pensions remain one of the most effective ways to support long-term financial security, but engagement can’t be taken for granted. Employers can make a real difference by clearly explaining the value of employer contributions."

Maintaining contributions for future security

The paper notes that with the current auto-enrolment minimum widely seen as insufficient to deliver many savers’ expected retirement income, maintaining steady contributions is increasingly vital. Employers and advisers are being urged to combine clear communication with tailored financial wellbeing support to prevent short-term affordability problems translating into weaker retirement outcomes decades later. "Clear, consistent communication, particularly at key moments such as pay reviews or major life events, is crucial to keeping retirement saving on track," Reid said.

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