In the last year, more than one in five UK employees (22%) have had to borrow money from family and friends because of money worries, and a fifth have taken on debt (20%)[1].
The impact of rising costs has also meant that 39% of employees think they will never be able to afford to stop working and 81% are also concerned that it means they will be less comfortable in retirement due to a shortfall in savings[2].
As well as these challenges, there also seems to be a general lack of pension understanding and engagement. 29% of employees are unaware that their pension is invested, and 49% are unaware of what their pension is invested in. However, interestingly, the research also found that 40% of employees would increase their contributions if they knew their pension was invested in funds that aligned with their values and beliefs[3].
Jonathan Watts-Lay, Director, WEALTH at work, comments;
“For people to better prepare for their financial future, it’s vital that they engage with their pensions as early as possible. Many don’t realise the significant difference a small increase to their pension savings can make. For example, someone in their 20s, saving just 1% more each year into a workplace pension can boost future savings by 25%. Small increases can have a significant impact on an employee’s pension savings, but small reductions in pension savings can also make a huge dent. Making small increases in pension contributions may not feel affordable but making small changes such as setting a household budget, shopping around and not auto-renewing on things like car insurance, as well as utilising workplace benefits i.e. discount schemes, really can make a huge difference when trying to find that bit of extra cash.”
He adds; “It’s also really interesting that our research indicated that many people would increase their pension contributions if they knew it was invested in funds that aligned with their values and beliefs. In recent years there has been a significant expansion of Environmental, Social, and Governance (ESG) considerations, with people wanting to align their pension investments with their values and beliefs. However, ESG is a broad category, and it means different things to different people. But simply knowing that pensions can be used to make a difference can be a powerful way to switch people on to better engage with their long-term savings.”
He adds; “People need support to understand their finances including ways to save money, budget, manage debt, as well as how to make the most of their pension savings for later life. Many leading workplaces empower their employees with financial education and guidance via financial coaches to help them build understanding and engagement around their pensions and the options at retirement. After all, people who better understand their pensions are likely to be more engaged and save more, make better decisions at-retirement and be financially better off, which ultimately is what pensions are all about.”
[1] https://www.wealthatwork.co.uk/corporate/2024/03/18/the-impact-of-money-worries/
[2] https://www.wealthatwork.co.uk/corporate/2024/06/20/retirement-worries/
[3]https://www.wealthatwork.co.uk/corporate/2024/04/17/pensions-engagement-research-survey-results-2024/