1.2m eligible workers MISSING out on pensions

Encouraging staff to save into a pension pot is becoming increasingly hard in the current economic climate, particularly as people try and save pennies where they can as the cost of living bites.

Now analysis of Department for Work and Pensions (DWP) data has found that pension participation is stalling at SMEs too.

Broadstone, who analysed the figures, has stated that this suggests a need for smaller employers to boost member pension participation.

The data revealed that a fifth of workers – the same amount for a second consecutive year – at smaller companies (around five to 49 staff members) who are eligible for a workplace pension are not participating.

This is equivalent to around 803,000 employees who are therefore not preparing for their retirement.

It added that 12% of workers at businesses with between 50 and 249 staff members are also not taking part in a pension scheme, meaning a further 374,000 people aren’t saving.

These figures suggest that almost 1.2m individuals working for SMEs may be falling through the pension accumulation gap and are missing out on billions of pounds of ‘free money’.

DWP’s data added that private sector workers contributed £37.5bn to pension savings in 2021, with employees benefitting from £7bn thanks to tax relief.

Reflecting on the findings, Rachel Meadows, head of pensions and savings at Broadstone, shared: “Workplace pensions are a fantastic way for workers to save in a tax-efficient way and even get free money from their employers and the government.

“However, it is clear that employees at smaller organisations are falling through the cracks at a greater rate than among larger employers. This is perhaps because these businesses are less likely to have a plan in place to communicate the need to start accumulating pension savings for later-life.”

Cutting payments

Separate research recently found that one in five younger workers are planning on cutting their pension payments.

A survey of 2,000 adults by Barnett Waddingham found that 18% of 18 to 34-year-olds said they would put less of their salary into their auto-enrolment scheme as the cost of living makes it harder to pay for household bills and fuel.

Mark Futcher, head of DC at Barnett Waddingham, said: “The cost of living crisis has forced many people to take a long hard look at their finances. But while there’s clear merit in doing some financial spring cleaning, cutting back on financial planning commitments could have a dramatic impact on long-term financial wellbeing.”

Read the latest issue of Reward Strategy magazine online here, which takes a look at the pensions dashboards deadline.