NAPF: Poor understanding of workplace pensions offers opportunity to boost retirement savings

The latest findings from the National Association of Pension Funds (NAPF) Workplace Pensions Survey1 show that more work must be done with employees to build their understanding of the benefits of workplace pensions.

The findings show that over one in four (29%) of all employees with access to a workplace pension (members and non-members of schemes) are unaware of pension tax relief and one in five (22%) are unaware of how much their employer contributes or would contribute if they were a scheme member. This equates to an estimated five million and 3.8 million employees respectively.

The NAPF believes that simple and regular information on the benefits has the potential to boost retirement savings amongst the British workforce, especially for those who have not joined their employer’s pension scheme.

NAPF Director of Policy, Nigel Peaple, said “The lack of understanding of tax relief and employer contributions presents an opportunity to boost retirement savings of the British workforce.

“Through regular and jargon-free communication, employers and the pensions sector have the opportunity to re-emphasise the benefits of workplace pensions. Addressing this knowledge gap could be a quick win.

“The workplace, through initiatives such as PENSIONSFORCE, is one of many ways forward.”

Knowledge of Tax Relief

An estimated five million employees2 (three million members and two million non-members) with access to a workplace pension scheme are not aware they receive, or would receive, tax relief on their pension contributions.

One in four (25%) employees who were members of a workplace pension stated they were not aware that they received tax relief, rising to two in five (42%) for those who are not members. Men were more likely to be aware of the tax benefits of pension saving than women. Overall, the figure was 29%.

Knowledge of Employer Contributions

An estimated 3.8 million employees2 (2.1 million members / 1.7 million non-members) with access to a workplace pension scheme said they did not know how much their employers contributed, or would contribute, to the workplace pension scheme.

One in six employees (17%) who were members of their pension scheme were not aware how much their employer contributed to their pension. This more than doubled (37%) for those who could join a scheme where they work but had opted not to. Overall, the figure was 22%.

Employer Explanation

Overall, an estimated 6.8 million employees2 (4.1 million members and 2.7 non-members) with access to a workplace pension scheme felt that their employers did not do enough to explain the pension they offer to employees.

The survey found that one in three scheme members (34%) felt that their employers were not doing enough to explain the pension they offer. This increased to 56% for those who had the opportunity to join the scheme but had not opted to. Overall, the figure was 40%.

PENSIONSFORCE

PENSIONSFORCE is an independent service provided free to employers by the National Association of Pension Funds. Its purpose is to help people understand the importance of planning for old age. Designed to give practical support to employers, PENSIONSFORCE helps employees understand the importance of planning for their retirement and provides them with information about saving for their future. It is supported by the DWP’s Pensions Education Fund. For further details http://www.napf.co.uk/PensionsForce/index.cfm


ENDS

Notes for Editors

1. The survey, which questions people about their attitudes towards workplace pensions, was carried out by TNS among 1,494 GB full and part-time employees (self-employment excluded from research) aged 16 - 64 between 14th to 21st February 2008

2. The total number of UK employees with access to a workplace pension is estimated by the NAPF at 16.9 million. This figure consists of:-

- Occupational Pension Schemes Survey (2006), Office for National Statistics estimates that there are 9.6 million active members of occupational pension schemes. http://www.statistics.gov.uk/downloads/theme_population/Occ-pension-2006/OPSS_Annual_Report_2006.pdf

- The Pensions Regulator estimates that there are 1.9 million members of Group Personal Pensions and 680,000 members of Group Stakeholder pensions. http://www.thepensionsregulator.gov.uk/pdf/discussionPaperGovernance.pdf

- The DWP estimates that 4.7 million people with access to a workplace pension have not joined. http://www.dwp.gov.uk/mediacentre/pressreleases/2008/may/pens068-160508.asp



3. The Occupational Pension Schemes Survey (2006), Office for National Statistics showed that employees contribute 4.9% (DB) and 3.0% (DC) of their salary into an open occupational pension scheme. Employers contribute 14.2% (DB) and 5.8% (DC) respectively. These figures are applied to private sector median gross weekly earnings of £439 (2006/07) from Annual Survey of Hours and Earnings 1997-2007, Office of National Statistics. The figures do not include contributions to GPP/Stakeholder pensions.


About The National Association of Pension Funds

The NAPF is the leading voice of workplace pension provision in the UK. Some 10 million working people are currently in NAPF Member schemes, while around 5 million pensioners are receiving valuable retirement income from such schemes. NAPF Member schemes hold assets of around £800bn, and account for approximately one fifth of investment in the UK stock market.


Journalists requiring further information, please contact Mark Brooks via

020 7808 1312 mark.brooks@napf.co.uk 07917 506683


Mark Brooks
Head of Press
Tel: 020 7808 1312 07917 506 683
Fax: 020 7222 7585
http://www.napf.co.uk