Half of workers ‘have never considered increasing current pension contributions’

Half (50%) of savers have never considered increasing their current workplace pension contributions, a survey has found.

Some 48% of people know the process to change their pension contributions with their current employer, while nearly three in 10 (28%) do not know the process to increase their pension contributions and a quarter are unsure (24%), according to research for the Pensions and Lifetime Savings Association (PLSA).

Men were more likely to say they know the process for increasing their pension contributions (55%) than women (39%).

Pay rises can give some savers an opportunity to consider increasing their pension contributions.

The survey indicated that many savers are open to the idea, with 42% saying they would consider raising their pension contributions depending on the size of the pay rise, and a further 27% saying they would be prepared to make additional contributions regardless of the size of the increase.

Younger pension savers, particularly those aged 18 to 34, were more likely to say they would increase their pension contributions if they received a pay rise (37%) than those aged 55 and over (20%).

Zoe Alexander, director policy and advocacy, 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 surveyed more than 2,000 people across the UK in December for the PLSA, which has retirement living standards on its website to give pension savers a general indication of the kind of lifestyle they could be on track for 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.