Employers 'should do more to help staff get to grips with pensions'
Only around one in eight firms are happy with their employees' levels of engagement with their pension, an industry survey has found.
Just 12% of firms said they are happy with current levels of employee engagement, according to the findings from the CBI and Aegon.
Workers who were older, earning higher wages and who had been working for their company for a longer period were significantly more likely to be engaged with their pension than younger workers and lower earners, the research found.
Firms recognised that improved employee engagement with pensions would benefit their business.
More than half (55%) felt stronger engagement would improve their ability to retain or recruit staff or with planning.
Paul Bucksey, managing director, Aegon workplace investing said: "Pensions are a big financial commitment for employers but this investment often goes underappreciated.
"A workplace pension is part of an employee pay package.
"The challenge is for businesses to help their employees recognise this."
The survey of businesses of all sizes found 92% of firms were contributing above the statutory minimum level requirement into workplace pensions under automatic enrolment.
The current minimum contribution rate is 2%, comprising 1% from staff and 1% from their employers.
From April 6, minimum contribution rates rise to a combined 5%, with a minimum of 2% from the employer and the remaining 3% from staff.
In April 2019, the rate will increase again, to 8%, with a minimum of 3% from the employer, leaving a 5% minimum staff contribution.
Nearly half of businesses (47%) felt that the pension freedoms, which give people more choice over how they use their pension pot, have led employees to become more engaged, the report found.
But a big barrier to engagement, reported by more than half (59%) of firms, is employees diverting money away from their pensions due to other financial priorities, emphasising the need to support staff to manage saving alongside living costs and any debts they have, the report said.
Firms also highlighted challenges around insufficient resources within their business to communicate with employees about pensions, as well as uncertainty about where to find high-quality advice for staff.
Neil Carberry, CBI managing director, said: "Businesses are contributing billions to their workers' pensions each and every year, playing their part in a quiet pensions revolution with auto-enrolment having a growing influence over workplace saving.
"While many businesses rightly recognise the positive effect that their investment in pensions can have on recruiting and retaining staff, others need to open their eyes to grasp the opportunities in front of them.
"Engaging better with your workforce on pensions is not a 'nice-to-have' but absolutely fundamental to the success of workplace pensions schemes and well-funded retirements for workers.
"Although many firms do a great job, there's an awful lot more that can be done to get staff engaged in their financial futures and to gain a better grasp of retirement planning.
"Many younger workers, those on lower incomes and employees who have been at a business for a short period are not getting the support they need to get to grips with issues that will help determine a successful path to when they retire."
The research included a survey of 189 firms, from small to large businesses, as well as further in-depth interviews with businesses from a range of sizes and sectors.
The report highlighted key steps that can help employee engagement:
1. Educating staff about the benefits of saving through workplace pensions and wider financial education.
2. Use simpler language and minimise jargon in pension communications.
3. If used appropriately, technology can be a valuable aid to communication and engagement.
4. Individualising pension communications as far as possible.
Minister for pensions and financial inclusion, Guy Opperman, said: "Employers across the country have helped to reverse two decades of declining pensions saving through automatic enrolment and many are already paying more than the minimum contribution rate, demonstrating their commitment to their employees' futures.
"They should be proud of what they offer their staff and make the most of it when it comes to recruiting and retaining employees."