1 million SME staff risk missing out on pension security
New analysis has found that workplace pension participation is stalling among the UK’s small and mid-sized enterprises. More than 1 million employees of SMEs may be missing out on a more secure retirement in this case.
Looking at the DWP’s latest workplace pension statistics, consultancy Broadstone has highlighted the need for smaller employers to boost member pension participation. The data uncovers that 20% employees at companies of between five and 49 staff are not participating – equivalent to an estimated 803,000 workers.
On top of this, a further 12% of employees at businesses with 249 or under are not participating in their pension scheme, marking a further 374,000 non-savers. That suggests around 1.2 million people working for SMEs are likely falling through the pension accumulation gap, running the risk of a lower income and quality of living in retirement.
Rachel Meadows, Head of Pensions and Savings at Broadstone, said, “Workplace pensions are a fantastic way for workers to save in a tax-efficient way and even get free money from their employers and the government. However, it is clear that employees at smaller organisations are falling through the cracks at a greater rate than among larger employers. This is perhaps because these businesses are less likely to have a plan in place to communicate the need to start accumulating pension savings for later-life.”
Proportionally, contribution rates at larger companies are far higher. Only one-in-10 employees at businesses with more than 250 people are not participating in a workplace pension – but that is still a huge number, equivalent to around 736,000 people.
Broadstone found that in total, private sector employers contributed £37.5 billion to pension savings in 2021. Employees also benefitted from a further £7 billion via tax relief.
The study comes after news broke earlier in 2022 that eight-in-ten workers were not saving at levels which are likely to deliver an acceptable standard of living in retirement, due to the pressures of the cost-of-living crisis. By the reckoning of Isio researchers, as things now stand, 16 million people will have less retirement funds than needed for an adequate standard of living in their lives after work.
