News & Insights | 28th September 2022
3 Min Read
Many UK families are having to rethink their spending, cut back on energy usage and essential outgoings due to the cost of living and rise in fuel prices, however a recent survey conducted by pension provider Penfold, has revealed that pension opt-out rates had risen in July by 27%, with more employees choosing to increase their monthly take home pay in lieu of saving for retirement.
Opt-out rates were around 10% at the start of 2022, but Penfold’s research shows that the figure is now closer to 13%. But is this a surprise? It has been well documented that UK inflation is outstripping salary increases. As well as this, interest rates continue to rise and with the Bank of England likely to implement more, the tightening of purse strings looks set to continue.
However, it is important employees do not stop contributing to their workplace pension scheme for too long, as they may miss the benefits of compounding, which is vital for an adequate pension pot to be built up over time. Compounding works by allowing small amounts of money, like regular contributions into a pension scheme, to grow into large amounts over time. Importantly the growth in value of these contributions is re-invested, creating a snowball effect.
But what can employers do to help avoid opt outs, through this period?
Because of their lack of immediacy when compared with other benefits such as extended holiday leave or sabbaticals, pensions may seem less attractive. However, a pension plays a pivotal part in a staff member’s retirement strategy, and they need to be promoted regularly. This will ensure their importance is understood and if a company can discuss pensions in an even more positive light, through enhanced contributions for example, opt-outs should be more readily avoided.
If you would like any consulting support regarding your pension contributions or engagement strategy, please do not hesitate to contact firstname.lastname@example.org