Auto-enrolment triggers ‘pension zombie’ warning

The head of corporate research for Bristol-based investment platform Hargreaves Lansdown said workers do not grasp the benefits of auto-enrolment, and are more likely to “fall off the savings wagon” if more pressing financial needs arise.

Mr Khalaf’s comments follow a survey of 100 employers carried out by Hargreaves Lansdown, which uncovered a common belief that pension contributions are being “wasted” on half of Britain’s workers.

The majority, 70 per cent, felt that pensions apathy among workers is down to their focus on more immediate financial concerns, and 47 per cent of respondents said that promoting other workplace savings vehicles, such as Isas, could help workers to save for the future.

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Mr Khalaf said: “If employers help their staff understand the need to save for retirement they can kill two birds with one stone; getting them to recognise the money the company pays in, and to consider whether their own personal contributions are adequate.

“Offering workplace Isas is one way to get staff thinking about saving in a way that appeals to their short and medium-term goals, creating a stepping stone to considering longer-term retirement savings.”

Key figures:

76% of employers think they should get more credit for implementing auto-enrolment

46% say they will contribute the minimum required by law

69% think auto-enrolment will not be beneficial for their business in the long term

Adviser view

Marcus Maisey, director of Hertfordshire-based KWD Associates, said: “There is a complete lack of understanding about what auto-enrolment entails and why it is being done. When more employees start to contribute, there will be noticeable lethargy in taking up pensions because people do not appreciate the true cost of retirement. Education is absolutely key.”