One in three workers don't understand their pension – here's what to do
A new survey has revealed something worrying: one in three workers say their employer never properly explained their workplace pension, or didn’t explain it at all. If that sounds like you, you’re not alone – and it’s worth taking action now.
The research, by pension firm Penfold, surveyed 2,000 workers and 500 businesses. It found a stark gap between what employers think they’re telling staff and what employees actually understand. While 85 per cent of employers believed their staff fully grasped the pension scheme, the reality was very different. A quarter of workers feel anxious or confused just thinking about pensions, and one in ten have never even checked how much they’ve saved.
This matters because your workplace pension, along with the state pension, will likely be your main income in retirement. And right now, you’re probably missing out on free money.
Here’s the good news: your employer is legally required to contribute at least 3 per cent of your salary into your pension (on earnings between £6,240 and £50,270 per year). The Government then adds another 1 per cent through tax relief. You must contribute at least 4 per cent yourself to get the full benefit. If you opt out, you lose all of this – which is why auto-enrolment has been so important for getting people saving.
Many larger employers offer even more generous contributions – sometimes 4, 5, or 6 per cent. This is essentially free money towards your retirement, so it’s worth checking whether you’re getting the maximum available.
What should you do? Start by finding out how your pension actually works. Ask your employer’s HR or payroll team for a simple explanation. Check your pension statement – you should get one each year – to see how much you’ve saved. And if you feel confused, that’s normal: Chris Eastwood, chief executive of Penfold, says the answer isn’t just sending people more information, but finding regular, simple ways to help workers understand their pension.
If you’ve never reviewed your pension, now’s the time. It takes ten minutes and could save you thousands in retirement.