Nearly three in 10 do not know the process to increase their pension contributions and a quarter are unsure, according to the Pensions and Lifetime Savings Association
A survey has uncovered that 50% of savers haven’t even thought about increasing their workplace pension contributions.
While 48% are clued-up on how to change their pension contributions with their current employer, 28% don’t know the process and another 24% are unsure of the process, according to findings for the Pensions and Lifetime Savings Association (PLSA).
It seems men are more likely to say they know the process, with 55% knowing how to boost their pension pot compared to just 39% of women. Pay rises can give some savers an opportunity to consider increasing their pension contributions.
The survey showed a significant number of savers, 42%, would think about increasing their contributions with a bigger paycheck, and an additional 27% are ready to contribute more regardless of any pay increase. Younger people, especially those between 18 to 34, are keener to increase their future funds with a pay rise (37%) than the over-55s (20%).
Zoe Alexander, director policy and advocacy at PLSA, said: “This research underscores the gap between knowledge and action when it comes to pensions. People understand the need to save more, they know how to do it, they even want to do it, but for many it simply doesn’t happen.”
“The reality is that many individuals are putting off important pension decisions because they feel overwhelmed by today’s financial pressures or are unsure about how to make the changes.
“More needs to be done to help people take the next step – whether it’s through better education, clearer communication or making pension adjustments more automatic.
“Pensions can feel like a distant concern, but that attitude is leading to poor outcomes down the line. Those with DC (defined contribution) pensions are more likely to need to take positive action themselves to secure the retirement they expect, as the default 8% savings rate may fall short.
“Small actions, like reviewing investments, slightly increasing contributions, or maximising employer (contribution) matching, can significantly impact long-term outcomes.
“However, employers and policymakers need to consider clearer guidance and behavioural nudges to help people act sooner rather than later.The process needs to be as simple and straightforward as possible, and we need to help people make their pension savings a more immediate priority, especially if they have the ability to save more.”
“Without addressing this disconnect, many people will continue to miss out on the retirement they hope for.”
Yonder conducted a survey of over 2,000 people across the UK in December for the PLSA, which provides retirement living standards on its website to give pension savers a rough idea of the lifestyle they could expect in retirement.
Here are some tips from the PLSA for employees looking to find out more about increasing their pension contributions:
– Speak to your HR or payroll team
They can help you understand how contributions work, your options for increasing them, any deadlines, and how automatic enrolment and contribution levels affect your future savings.
Employers often provide resources such as guides or helplines to make pensions easier to understand.
Reviews of contributions can be supported through annual meetings, reminders, or one-on-one sessions with HR.
You could also use online calculators from your employer or pension provider to model different contribution scenarios.
– Maximise employer contributions
Firms match pension contributions up to a certain limit and some go beyond the minimum set out under automatic enrolment.
Ensuring you contribute enough to get the full match can significantly enhance retirement savings.
Some employers increase matching over time, so ask about long-term benefits.
If unsure about your contributions, your HR or payroll team can guide you.
– Check whether salary sacrifice is available
Salary sacrifice lets you exchange part of your salary for pension contributions.
Confirm availability with your employer and make sure you understand its impact on other benefits, such as life insurance.
– Boost your pension with one-off contributions
Some people may consider using bonuses, commissions, or unexpected income to make lump sum contributions.
Ask your employer or provider about the processes. Allocating bonuses directly to your pension could potentially mean some tax savings, enhancing long-term savings pots.
