Department for Work & Pensions  

Nearly 1.2mn people missing out on pensions savings

Nearly 1.2mn people missing out on pensions savings

Almost 1.2mn small-to-medium-enterprise workers are missing out on pensions savings, according to analysis from Broadstone, which has called for these employers to boost member participation.

The research, based on the Department for Work and Pensions workplace pension statistics published in June, showed that one in five (20 per cent) employees of smaller companies (5-49 staff) eligible for a workplace pension are not participating — equivalent to an estimated 803,000 workers.

A further 12 per cent of employees at businesses with 50-249 staff are also not saving in their workplace pension scheme, equivalent to 374,000 workers.

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In contrast, contribution rates at larger companies are far higher, with only under one in 10 employees at businesses with more than 250 people not participating in a workplace pension.

However, Broadstone noted that some employees may be contributing to a personal pension, which is not counted in this data.

Nevertheless, it is typically a small proportion of people that opt to do so — the latest figures suggest around 5 per cent of individuals have a personal pension.

Figures from the DWP statistics also showed the benefit to employees of participating in a workplace pension scheme — in total, employers in the private sector contributed £37.5bn, with employees gaining from a further £7bn through tax relief, the consultancy highlighted.

Broadstone head of pensions and savings Rachel Meadows stressed that “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”.

Meadows argued that employers “should be taking steps to increase communications and provide sources of guidance on the benefits of pension saving, to make clear the responsibilities individual pension savers bear as well as the vast financial contribution that employers and the government will also make”.

She added: “With pensions being one of the biggest employee benefit costs for most employers, allocating a small extra spend on boosting staff knowledge can reap a big reward.

“This is the key to improving understanding, and therefore engagement and participation, among employees and ultimately aligning participation rates with larger employers.”

Maria Espadinha is editor at Pensions Expert, FTAdviser's sister publication