The number of eligible private sector employees saving into a workplace pension has increased significantly in the last decade, reaching 14.4 million in 2021.1 But while it’s encouraging that more people are saving for their future, not everyone understands how their pension works, or even how much they’re paying in. The Money and Pensions Service (MaPS) notes that less than half (47%) of working-age adults in the UK say they understand enough about pensions to plan for their retirement.2
As an employer, you can help your employees to build the knowledge and confidence they need to have more control over their pensions. This could have long term benefits by impacting how they think and feel about money – and how they manage it.
Here’s what it means to be pension confident, plus tips on how you could provide support in the workplace.
What is pension confidence?
Pension confidence comes from the ability to understand and manage a pension. From knowing what a pension scheme can provide and how they work, to being comfortable making changes to suit the needs of the individual. It’s also about developing a positive money mindset, which can influence how people approach retirement planning and how prepared they are for achieving their desired retirement lifestyle.
Building pension confidence can play a role in improving overall financial wellbeing. 61% of people say that being able to understand money better is an important aspect of their financial wellbeing.3 Or, in other words, their current and future financial position and their relationship with money.
What happens when your employees lack pension confidence?
When people lack pension confidence, they might not be saving enough for the future. Our research with 2,000 UK respondents, found that 40% of those auto-enrolled in a workplace pension scheme aren’t confident they’ll have saved enough for the lifestyle they’d like in retirement.4 In addition, the MaPS found that 77% of those who say they don’t understand enough about their finances for retirement, don’t have a financial plan for later life.2
This lack of confidence and concern for the future has the potential to impact financial wellbeing and, in turn, performance in the workplace. Money issues can bring about high levels of stress and disruption and might in some cases lead to absences from work.10% of employees have missed days at work due to financial worries, while 18% have noticed a decline in productivity.5 This affects you as an employer, too. It’s estimated that the total cost of absenteeism and presenteeism in the workplace due to financial worries for small, medium and large firms is £4,544, £22,746 and £323,390 respectively.5
How you can help to build pension confidence
Building pension confidence could improve the overall health, resilience and productivity of individuals in the workplace. They’ll feel valued, and see you as a responsible employer, which could boost talent retention.
If you’re looking to strengthen the support you provide, here are a few ideas on how you can do so.
1. Build their financial education
A lack of understanding is a significant barrier to people feeling confident with their pension. This may lead to people taking less action with their pension, for fear of making a mistake that might lose them money.
Getting your employees comfortable with pension basics could be a good place to start. Consider providing learning opportunities on key pension topics such as how their pension is invested, account charges and how to read a pension statement.
Remember to consider what formats might work best for your team. For example, the Department for Work and Pensions (DWP) suggests that information should be tangible, succinct and visually engaging. You could also point them to the Pension Geeks website which features a range of videos explaining different aspects of their pensions.
Read more on how you can improve financial literacy among your employees.
2. Help them visualise their future
As we noted, having a more positive money mindset can allow people to better plan for the future. It can help them take a more proactive approach to saving – gaining pension confidence in the process. In fact, having a concrete and meaningful connection to their future makes people four times more likely to contribute higher amounts into their pensions.6
Encourage them to picture their future self with our tool.
3. Demonstrate how they can influence their pension outcomes
According to a survey of 60 respondents conducted by the DWP, people often feel detached from their pension savings and therefore lacked motivation to learn more about it.7 Some also felt they had little control over their pension savings. You could encourage a greater sense of ownership and ultimately, understanding, by showing your employees what options they have and how their actions could make a difference.
For example, the DWP suggested that people weren’t able to assess whether what they had saved was a ‘good’ amount or not. You could point them to the Pensions and Lifetime Savings Association’s Retirement Living Standards for an idea of the average income needed for retirement. They can then put these figures into context by using a pensions calculator like this one from MoneyHelper.
By using the calculator, your employees will be able to see if they’re on track for retirement. And crucially, it can allow them to learn how taking an action, such as increasing their contributions, could make a difference to their income at retirement.
Knowing they have the power to influence their pension outcomes can motivate people to engage with their pension more often, building confidence as they go.
4. Show them how to spot a scam
The DWP also noted fear as a barrier to pension engagement. This was partly from a fear of making a decision that might lead to them losing their pension or being over-charged. People didn’t feel confident in taking actions like consolidating their pension pots in case they were being scammed.7
To build confidence when managing their pension online, you could share support on how to spot a scam and stay safe, like our online security and fraud protection hub. This action could not only be beneficial to your employees, but for your business as a whole, to improve workplace vigilance towards online threats.
Build pension confidence for the long term
Promoting pension confidence in the workplace can help your employees develop a positive money mindset and improve their overall financial wellbeing. This has the potential to create a happier and more productive workplace – one that could benefit your business.
Check out further support for promoting your workplace pension scheme.