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17 Jun 2024

7 smart tips to help employees make the most of their pension benefits

A pension is a valuable employee benefit so how can we help them make the most of it?

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Employee benefits are important to many people – whether it’s rewards, perks or shopping discounts. When it comes to workplace pensions, however, they’re not always well understood – or made the most of.

Not everyone understands how they work, or why they need to save into a pension. Yet we know from Scottish Widows’ Retirement Report that just over a third of people will face poverty in retirement unless they act sooner.

The good news is there are lots of ways providers, employers and human resources departments can support employees to encourage them to save.

1. At the start: Let employees know about their pension scheme 

When they join your organisation, lay out their workplace pension benefits and how much they’ll contribute. Explain those employer contributions constitute ‘free’ money to bolster their pension pots. This is especially beneficial if your company matches additional contributions made by employees.

Let them know how it appears on their payslip, when they’ll be auto-enrolled and if it’s salary exchange (or salary sacrifice). Don’t assume everyone understands it. 

Show them where to find support from their pension provider and encourage them to sign up to their pension app. Research shows apps encourage pension engagement. 

2. Help them understand their pension essentials

Understanding why employees should save for their future is a great start. But pensions can be complicated, and so helping them to understand the basics is a great start.

In a nutshell: they pay in, their employer pays in. It’s tax-efficient and the money goes into investments to give it a chance to grow. When they're more confident, they can find out more. 

3. Take the message to employees 

Employer or provider-led webinars and regular communications help people build knowledge. Have on-site, face-to-face, or virtual sessions at a time to suit employees. Use a mix of videos, podcasts, webinars, social media and email to get pension communications out in a way that suits audience needs – and that works.

Since last year, Scottish Widows’ pension mirror tool has been used more than half a million times. People take their photo on their smartphone. The tool then guesses their age and compares their pension savings. It’s been something of a game changer because it makes engagement easy and fun, with a serious underlying message about saving for their future. 

4. Explain the tax benefits

Pensions are a tax-efficient way to save as they benefit from government tax relief designed to encourage saving.

Salary sacrifice schemes are even more tax –friendly. The employee gives up part of their salary in return for an equivalent pension payment. This could reduce their overall taxable income and lower their income tax and National Insurance (NI) contributions. The employer can save on NI contributions too.

5. Encourage digital access

Using an app to manage pension savings keeps employees in touch with their fund value, what they might need in the future and the impact of making changes. This could help when deciding to pay in more or access their money at different times. It also offers an easy way to name beneficiaries should anything happen to them. This isn’t normally covered in a Will.

6. Offer employees financial wellbeing support

Almost 8 in 10 UK employees take their money worries to work, according to the Money and Pensions Service. It can affect their mental health, home life and their work. More and more these days they want, and expect, financial wellbeing support from their employer. There are many ways for employers to champion financial wellbeing in the workplace, including the workplace pension as well as saving, budgeting and ways to tackle things such as debt.

7. Educate about pension scams

Millions of pounds are lost to pension scams each year, with fraudsters often targeting those in their 50s who have a potentially larger pension pot. To help, employers can arm employees with information from their provider. The FCA also has plenty of ScamSmart guidance on ways to keep retirement savings safe.

In partnership with Scottish Widows

Scottish Widows is a life, pensions and investment company.

Contact us today