Surprising facts: What do 'employees like mine' think about pensions?

As auto enrolment rolls out, pension scheme members are becoming increasingly reliant on their workplace pension in retirement. For many, employer contributions are the main reason for saving according to Scottish Widows' research.

In its recent Workplace Pensions Report, 60% of workers in larger organisations said they’ll rely on a workplace pension for a reasonable standard of living in retirement, compared to 40% in medium businesses and 32% in smaller organisations.

Over half (54%) of those in a defined contribution scheme, said employer contributions are seen as crucial to boosting pension savings.

As smaller organisations stage they too may see a growing reliance on them for good schemes and educational support. Helping employers understand their employees’ attitudes and how they’re saving is the key to adapting to this growing dependence.

Scottish Widows recently launched a new interactive digital tool, ‘Employees like mine’, to bring some of this information to advisers’ fingertips, so they can better understand the retirement saving habits and attitudes of workers in their clients’ industries.

What the insights are telling us

When you look further into the detail, employees from some industries and business sizes are faring better than others.

Scottish Widows found employees in large construction, medium IT and telecoms, and small and micro financial services businesses are saving much more than the national average into their workplace pensions.

But, some are significantly under preparing for retirement, like those in large and medium retail businesses, and small and micro transportation and distribution businesses, who save the least into their pensions.

It also found some employers are contributing generously into workers’ pensions, while others are paying considerably less than the national average. For example, small and micro employers in construction, and large and medium transportation and distribution businesses contribute the least into their employees’ pensions.

What does this mean for employers?

Across all industries and business sizes, significant populations of employees think they are not saving enough.

More than half of employees in large retail businesses think they’re not saving adequately for retirement, but worryingly, nearly one in four say they’re also more likely to opt out of workplace pension when their minimum contributions increase in 2018. This could lead to employees in some sectors working well beyond retirement age because they simply can’t afford to retire.

Already employees in medium-sized accountancy and legal firms think they won’t be able to afford retirement until they’re 68.

How can you help your clients?

Employees want more information about retirement.

41% of large business employees would like to see employers provide help and support for retirement planning. Advisers should be looking at how they can evolve the service they offer employers to address this growing need, and this may mean taking on a role they’ve never had before.

Research conducted by Workplace Savings & Benefits found that 70% of employers did not already have a financial education programme in place. Amongst those who do have one, a third of them are considering expanding it over the next 18 months. Nearly all (99%) were in agreement that something needs to be done to address the gap in financial education.

Employers know there’s an education gap but so few of them have done something about it. There’s a great opportunity for advisers to address this gap and carve a new offering into their service.

Fortunately, there’s plenty of support out there for employers, but advisers have a key role to play in helping employers realise the benefits of investing in the financial education of their employees, and helping them establish them.

Remember, knowledge is power.

Understand how the employees approach their retirement plans, what their fears and challenges are. Use this information to build the education workers need.

Ultimately, helping employees recognise the importance of making plans early and saving, will help employers avoid storing up succession problems for the future.

This article was provided by Scottish Widows.