New Index shows low engagement levels in the run-up to automatic enrolment

  •  Many employers (70%) are aware of pension reform changes but 68% of employees have little or no knowledge of automatic enrolment yet.
  • 43% of employees currently without a pension said they would remain in a scheme once they were automatically enrolled – but opt outs could be significant.
  • Employees are most concerned (53%) about how their pay compares to the cost of living, while employers worry most about keeping up with the competition (58%).
  • More than half (56%) of employees agree pensions are the best way to save for retirement but 55% of employees without one say they simply don’t have the cash.
  • Employers recognise their workers are critical to their business success, but over a third (39%) are looking to motivate them without ‘unduly increasing pay’.
  • The first Savings Engagement in Employment (SEE) Index shows significant room for improving employers’ and employees’ levels of awareness, ownership and enthusiasm for workplace saving.

The challenge of getting Britain’s workers saving for their retirement is highlighted in Aviva’s first Working Lives Report, which reveals the daily struggle faced by employers and employees as they seek to balance business priorities against personal financial needs.

Surveying UK private sector employees and employers about their attitudes to saving in the workplace, the Working Lives research shows businesses, Government and the pensions industry across Britain have significant work to do in encouraging employees to start putting some of their hard-earned cash aside for their retirement.

Economic climate
Against a backdrop of economic uncertainty, the vast majority of UK private sector employers (96%) surveyed said their employees were absolutely critical to the success of the business. And overall, UK employees seemed to be generally happy in their work – with 27% saying they really enjoy their work and 45% saying they quite enjoy their work.

But for both employers and employees – the issue of money is absolutely central to their workplace relationship. Over a third (39%) of employers said they were looking for ways to motivate their workers without ‘unduly increasing remuneration’ and 46% said they designed their pay and benefits packages carefully to control costs.

While employers recognised the contribution made by employees, their most immediate business concern was a commercial one – how to keep ahead of the competition (58%). However, the highest percentage of employees (53%) said that ensuring their pay kept up with the cost of living was their key workplace concern.

Pensions and saving in the workplace
While pensions top the list (56%) as the best way people like to save for retirement, those actually saving into a workplace pension in the private sector right now remains relatively low at 35%. At the same time, the number of employees who say their employer offers a workplace pension (54%) is on the brink of radical change with the start of automatic enrolment.

Of those employees who are offered a workplace pension but neither they or their employer contribute 55% say they don’t have the spare cash to contribute to a pension, 28% say they need to repay debts and 20% say they need to pay for immediate family costs.

Automatically enrolling employees into a pension
With only months to go before the start of automatic enrolment, many companies (43%) said they were already preparing for the changes they would need to make. While 70% of employers are aware of automatic enrolment, the fact remains that 68% of employees still say they have little or no knowledge of upcoming workplace pension changes.

Opt out rates from automatic enrolment are also potentially significant, with employers thinking that the typical percentage of employees opting out will be 33%, and a similar number (37%) of employees saying they may choose to leave. But 43% of employees currently without a pension said they would remain within the scheme once enrolled, and of those 8% said they would contribute more. Those that were undecided amounted to 21%.

Workplace benefits
Broader workplace benefits are increasingly coming to the fore as employees seek help in bridging the cost of living gap. The top five benefits valued by employees (and which they are offered) are: annual bonus (36%), pension (16%), health insurance (15%), life insurance (14%), and non financial benefits (14%), such as discounts on products, subsidised gym membership and crèche facilities.

Savings Engagement in Employment (SEE) Index
Aviva’s new SEE Index shows a lack of engagement in workplace savings by both employees and employers. Looking at the levels of awareness, ownership and enthusiasm for workplace saving – the benchmark results indicate a worrying lack of commitment by both employees (a score of 29 out of 100), and employers (a score of 38 out of 100). The SEE Index supports the view that communication and engagement in the workplace remains pivotal to encouraging employees to put money aside for their retirement. Working Lives currently shows that employees often rely on their own resources to make decisions on workplace saving, rather than getting timely and regular employer-driven communications:

  • Almost a third (31%) of employees primarily rely on annual statements for information and 22% use the company intranet.
  • Non-work sources include the media (24%), a further 21% opt to speak to their family and friends.

Aviva’s managing director of corporate benefits Graham Boffey said:
“Aviva is a long-standing advocate of automatic enrolment, but we recognise that Britain’s employers are facing the significant challenge of transforming the way they provide pensions and workplace benefits at a time of continuing economic uncertainty.

“When the first companies start to automatically enrol their employees in October this year, we can’t expect an immediate step-change in how people save for their retirement – employers and the industry will need to make a long-term commitment to ensuring it’s a success.

“Companies are increasingly going to need to find relevant and compelling ways to talk to their employees about their savings and benefits options. And as more people start to use the workplace for managing their money, practical planning tools and clear guidance will be essential.

“While the time, resources and commitment being called for from employers over the next few years should not be under-estimated, there are clear benefits for those who really understand what savings and benefits their employees value, and importantly, how best to discuss them in the workplace.

“Employers willing to put in the time and effort will find themselves in a win-win situation. Broader workplace savings and benefits are a cost-effective way of boosting employees’ total packages beyond basic pay, and we know employees want additional and more relevant benefits that help them make the most of their money.

“While Working Lives shows some areas for concern, there are equally positive signs that employers and employees are willing to embrace this period of workplace change and in doing so they will help to re-invigorate Britain’s savings culture.”