UK employees are missing out on nearly Ã‚Â£6bn of ‘free money’ each year because many workers are failing to sign up to the pension scheme offered through their workplace, reveals a new report by Standard Life.
Around 4.5 million people in the UK are offered a free pension contribution from their employer yet do not join their company pension scheme. Based on a UK average salary of Ã‚Â£25,428 and a five per cent employer contribution rate, the typical employee misses out on Ã‚Â£1,271.40 each year.
In addition, nearly a quarter of employees don’t take advantage of the maximum employer match available, losing out annually on Ã‚Â£790 of contributions to their pension. A further 9% of people didn’t know if they did or not.
John Lawson, Head of Pensions Policy at Standard Life said: “With employers closing their final salary pension schemes, most employees will instead build their retirement fund through a defined contribution pension scheme. Some employers will match any contribution made by an employee into a company pension. Some will contribute a percentage of salary without commitment from the employee.
“Our research shows that a huge number of people miss out on this ‘free money’ and as a result lose a significant contribution to their retirement fund. Auto enrolment to corporate pension schemes, being introduced in 2012, will help overcome this issue. However, our findings are a clear call to action to improve communication around the benefits offered to employees. More needs to be done to equip people with the knowledge to make informed choices about how to save.”