Workplace pensions: How much is enough?

Over 76% of UK employees taking part in our research contribute to a workplace pension, thanks to automatic enrolment.

Nearly half of employees rank pensions among the most valuable benefits when considering applying for a new job, especially those aged 50-69 (62%). Pensions came second only to salary, outranking flexible working and bonuses.

Despite high participation, average employee contributions (4.8%) remain below the recommended 5% minimum. Worryingly, 46% of employees contribute less than 4% of their salary, with women contributing less on average than men. This highlights the need for further support to help employees understand how much they should aim to save.

Employer pension contribution matching schemes, where employers match additional employee contributions, motivate employees to save more. Yet only 37% of employees said they took advantage of this benefit. Those who do use employer pension contribution matching are more likely to expect a moderate or comfortable lifestyle in retirement.

Employees’ expectations for pension savings vary a lot, with the average desired annual income now standing at £58,300, much higher that the income required for a comfortable standard of living in retirement. This may be because only 31% of employees have heard of, and understand the Retirement Living Standards. When questioned, most employees expected a moderate lifestyle, but a significant minority anticipate only a minimum standard.

Employee engagement is on the rise with 73% now checking their pension at least once a year and 56% checking more often than this. Regular engagement is strongly linked to better savings outcomes. Reinforcing the benefit of encouraging employees to take an active role in managing their workplace pensions.

More than half of employees have never sought professional advice or guidance about their workplace pension. Yet those who do are more likely to take positive actions, such as switching investments or making one-off contributions. This suggests that promoting access to advice could have a meaningful impact on retirement readiness.  

Two in five employees have transferred their workplace pensions, mainly to consolidate savings for easier management. Younger employees and those with higher incomes are more likely to transfer, many are held back by a lack of awareness or perceived complexity. Addressing these barriers could help more employees gain control over their retirement savings.