A new CIPD report has revealed that the average employee pension contribution to a workplace-defined contribution pension scheme is currently 5 per cent, but most employees think they should be saving almost double that. Four in ten think they should be contributing more than 10 per cent of their salary to their retirement savings and almost a quarter admitted they didn’t know how much they should be contributing. The shortfall between what employees are paying in and what they think they should be paying is highlighted by the fact that over half of UK workers have considered how they might work past state pension age and one in ten people are worried that they will never be able to afford to leave paid employment.
The report, Employee Attitudes to Pay and Pensions, from the CIPD, the professional body for HR and people development, is based on a survey of 2,255 working adults. It highlights the urgent need for both Government and employers to help workers understand the value of workplace pension schemes and the importance of retirement planning.
When asked how they plan to retire from paid employment, 40 per cent of employees said they want to reduce their hours gradually from full-time to part-time and 32 per cent plan to work full-time right up to retirement. Almost a third of people surveyed are less certain of their retirement future; 15% haven’t thought about how they will retire and one in ten said they may never be able to leave paid employment. Private sector workers are twice as likely to think this compared to those in the public sector.
Charles Cotton, Reward Adviser for the CIPD, said: “The looming pensions crisis cannot be ignored any longer. Auto-enrolment has been successful in getting six in every ten eligible workers saving through a workplace scheme, but their ability to contribute adequately is being severely hampered by poor wage growth. Until the Government and businesses can tackle the root causes of the UK’s productivity challenges, we won’t see the wage growth needed to improve individual pension contributions and people may need to stay in work a lot longer to have a sufficient income.
“Businesses, and HR professionals in particular, need to be prepared for the real possibility that over half of their workforce will want to be employed beyond the state pension age. To support them, and reap the benefits of an age-diverse workforce, they need to think carefully about how they will manage and support these individuals, from training and development through to reward schemes, reasonable adjustments in the workplace and wellbeing support. We need a collaboration between employers, employees and the Government to ensure that workers are getting the financial information and education they need around retirement planning, and, if they do plan to work to a later age, that they get the support they need in the workplace.”
The CIPD’s survey found that nearly two thirds of people have considered working beyond the state pension age in some capacity. Almost half would like to do so in a permanent job, and preferably in a part time role rather than a full-time role. One in ten would prefer to take up employment on a casual, temporary, self-employed or fixed term basis.
The survey also found that the size of a business has a considerable impact on the individual’s ability to save for a pension and the age at which employees expect to retire. Workers in medium- and large-sized businesses expect to retire at 65, rising to 66 in small businesses and 68 in micro businesses. Those who aren’t saving through a workplace pension scheme (typically those in smaller businesses) expect to stop work at 67, with 7 per cent anticipating they will have to work past the age of 70. In addition, the CIPD’s research found that 76 per cent of employees working for a micro employer and 60 per cent of those working for small businesses are not enrolled in a workplace pension scheme.