As an employer, you will be aware of the acute importance of employee pension contributions.

With the introduction of auto-enrolment more than a decade ago, it has never been easier for individuals to contribute to a workplace pension. Yet, according to research published by PensionsAge, in the year to February 2023, 51% of employers had requests to reduce contributions, and 47% had employees ask to stop payments completely.

While it is understandable that your team could be worried about their finances at the moment, as an employer, it is important to protect your employees’ pensions where possible.

So, here are three steps you could take to help your team reach their retirement goals, even during the cost of living crisis.

  1. Listen to your team’s concerns about paying pension contributions in the cost of living crisis

Before we get to the more practical tips, it is important to note that the first step to helping worried employees is to listen.

If your colleagues are vocalising their money worries during the cost of living crisis, this is an opportunity to establish yourself as an open, approachable employer. Whether you’re an HR representative, a business owner, or manager, leave your door open for individuals to come and chat when they need to.

By simply listening, you could establish the key factors that are worrying your employees when it comes to their workplace pension.

Things you might hear again and again are:

  • “I need to stop my pension payments to make room for other essentials.”
  • “I’m too young to be saving towards retirement – there are more important things on my plate.”
  • “I want to save for retirement, but I can only afford to pay the minimum.”

Active listening to these and other statements without judgement can make you aware of the issues at hand, and help you implement the next two steps in this list.

  1. Emphasise the importance of long-term pension contributions

As an employer, you will be aware of just how essential pension contributions are for your employees’ futures. Yet when fear and doubt creep in, thoughts of future security can fly out of the window and be replaced by a need to have immediate cash available.

So, reminding your team of the importance of long-term pension contributions could be a great step to take.

It’s important to emphasise that a pension is not just a “savings account”. Unlike a simple cash savings pot, a pension is an investment that, given enough years, is likely to grow significantly in value before an employee retires. The essential fact of compounding growth could be lost on some individuals – particularly young people who may not be thinking seriously about retirement yet.

Points to cover might include:

  • Employees may miss out on government tax relief.
  • Pausing pension contributions could reduce their State Pension entitlement.
  • Employees might lose access to pension-linked cover, such as life insurance.
  • Your team could lose the additional employer contributions they usually receive. Although, using the Secondsight Interim Income Accelerator, you could allow employees to take a “pension holiday” while continuing to pay employer contributions.

On the other hand, it is important to accept your employees’ decisions regarding their workplace pension.

No employer wants to encourage a pension holiday, yet if employees decide to halt contributions altogether, their choice must be respected. When they decide to proceed with contributions again, you can help them get back on track.

  1. Offer financial planning insights to help employees feel confident about saving for retirement

Ultimately, if you’ve seen an uptick in employees wanting to pause or halt pension contributions, it’s a sign they could be feeling financially overwhelmed. This is where practical, constructive steps can be taken to educate and empower them to save for their future.

Indeed, even before the cost of living crisis, many people were largely unaware of just how much they needed to save for a financially viable retirement. Data from the Pensions and Lifetime Savings Association (PLA) reveals that in 2021, approximately half of single employees weren’t on track to achieve their saving goals.

Offering financial advice as one of your employee perks can be hugely valuable. Gaining access to professional planning can help employees:

  • Understand the importance of saving for later in life
  • Recognise unhelpful financial habits and behaviours, and rectify them where possible
  • Determine a suitable level of retirement income
  • Develop powerful retirement savings objectives
  • Set up a strong pension contribution plan that helps meet their later-life income targets.

Giving your team the opportunity to seek professional advice during economically challenging times could be life-changing.

Get in touch

For guidance on how to help your employees save for retirement during the cost of living crisis, contact us. Email or call us on 0330 332 7143.

Please note

This blog is for general information only and does not constitute advice.

A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Secondsight is a trading name of Foster Denovo Limited, which is authorised and regulated by the Financial Conduct Authority.