Employees under the age of 30 are the most likely to increase their monthly savings to take advantage of an employer pension match, research from Hargreaves Lansdown has shown.
The FTSE 100 company found 49 per cent of employees choose to increase their monthly pensions savings due to good communication from pension providers but when their employer offers to match their increase in contributions the amount choosing to save more increased to 61 per cent.
Nathan Long, senior analyst at Hargreaves Lansdown, said: "The optimum level of workplace pensions contributions are like Goldilocks’ search for the perfect porridge.
"With pensions, too little going in and people don’t have enough to live on in retirement, too much and they won’t have enough to live on now; they might even just opt out."
Contribution matching appeals more to younger employees than older ones, with one third of under-30s choosing to up their contributions, compared to 18 per cent of over-50s.
Savers with small pots also seem to be less influenced by the offer of a matching contribution.
For those with pensions worth less than £5,000, offering matching contributions did not change behaviour, whereas when someone has a pot of more than £5,000 the likelihood of contributing more is boosted by more than a third.
"While debate rages on what the level should be, the government should look to employers to incentivise higher contributions by offering to match additional contributions made by their employees.
"It’s an approach used by some employers already and is particularly effective at incentivising the under 30s to pay more in." Mr Long said.
The government has been lobbied by the pension industry to increase contributions higher than the 8 per cent they now stand at, with many calling for the minimum to rise to 12 per cent.
In December 2018 the government announced that from 2020 staff would be enrolled at the age of 18, rather than the current level of 22. Also that members would accrue pension contributions from the first pound earned, currently the first £6,136 do not attract a contribution.
These changes boost the expected pension pot for an average earner at age 68 from £150,893 to £220,791.
Another way to encourage people to save more is to combine a face to face meeting with a matching contribution, as according to Hargreaves Lansdown’s research three quarters of people would feel more compelled to contribute more.
The government could also mandate employers to offer a level of matching on top of the minimum auto-enrolment contributions to incentivise further saving. In doing so, the employer would be required to contribute more only for those employees who were committed to personally saving more for their future.
As part of its research Hargreaves Lansdown analysed the behaviour of 53,000 pension scheme members who have chosen to increase the amount they save every month.