Two out of five 'will save more' because of pension flexibility

• But just 41% of workers know that their employers will contribute extra
• Employers need to focus on financial education, Portus Consulting says

Up to two out of five employees are planning to increase their company pension contributions in response to the new pension freedoms launching next week, research⁽¹⁾ from award-winning employee benefits consultancy Portus Consulting shows.

Its study among employed adults found 39% say they plan to pay extra into their company pension rising to 44% among employees aged between 35 and 44 as a result of the changes to how retirement savers can take their income.

However just 41% know how much their employer will increase pension contributions by as a result of the changes which enable all retirement savers aged 55-plus to take their defined contribution pension savings as cash subject to tax at their marginal rate.

Just 40% of employees questioned believe they are saving enough for their retirement either into pensions or alternatives such as ISAs or property, the research shows.

Portus Consulting believes the mismatch between employee plans to save more and their understanding of contributions from employers coupled with the admission that workers are not saving enough underlines a need for companies to focus on financial education and guidance.

Stuart Gray, Chairman of Portus Consulting said: “The pension changes have struck a chord with employees and plans to save more into pensions are to be welcomed.

“The issue however is that there is a lack of financial education and guidance with employees unsure about whether employers will match their increased contributions and just as worryingly the majority of employees admit they are not saving enough.

“Employers can play a major role in providing guidance for staff and see genuine benefits without having to make a major investment. There is clearly demand from staff for support with retirement planning and plenty of support available for employers who want to engage.”

Portus’s research shows 50% of workers admit they are not saving enough for retirement or are unsure whether they are. Around 11% say they are not saving at all for retirement.

Around 20% of those who are saving into company pensions say they have no intention of increasing their contributions while another 31% do not know whether they will increase pension saving as result of the April 6th changes.

The table below shows the intentions to save more into pensions among workers across the country.