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62% of employers expect financial pressure to drive pension opt-outs, study finds

According to People's Pension, 61% expected employees to cut contributions as they try to keep up with living costs. 

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62% of employers expect financial pressure to drive pension opt-outs, study finds
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Six in 10 (62%) employers said they were concerned financial pressure would mean more people opting out of workplace pensions, according to research from People’s Pension.

61% expected employees to cut contributions as they try to keep up with day-to-day living costs. 

Employers at medium-sized businesses were more likely to expect reduced pension contributions (72%), as were those in London (72%) and Yorkshire and the Humber (80%).

59% of employers said employees did not fully understand the value of pensions as part of their total pay package. 

Over half (52%) were concerned staff were not engaged or getting the most out of their pension. 

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49% admitted they did not promote the workplace pension well within their organisation.

Employers in wholesale, retail and franchising (68%), and construction (64%) were more likely to say employees were struggling to maintain pension contributions.

Despite the challenges, more than four in five small and medium-sized enterprise (SME) decision-makers (82%) said they felt responsible for their employees’ financial wellbeing, though 75% said rising business costs limited how much they could increase pay.

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When asked what would improve pension engagement, employers most often pointed to clearer communication and better education about pensions (45%), along with more support for financial wellbeing and retirement planning (40%).

Stuart Reid, distribution director at People’s Pension, said: “Employers are navigating a period where both businesses and households are under sustained financial pressure, and there is understandable concern about the impact this may have on long-term saving behaviour. 

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“What this research highlights is that affordability and understanding are closely linked.

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“Even short breaks or reductions in pension contributions can have a disproportionate effect over time.”

Reid added: “When saving stops, people miss out not only on their own contributions but on employer payments and years of compounded growth – losses that are hard to rebuild. 

“We see the long-term consequences of interrupted saving in the gender pension gap, where missing years due to childbirth and caring responsibilities have resulted in significantly lower retirement outcomes.

“Workplace pensions remain one of the most effective ways to support long-term financial security, but engagement cannot be taken for granted.”

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He said: “Employers can make a real difference by clearly explaining the value of employer contributions, highlighting the long-term impact of even small increases in saving, and offering simple guidance that helps employees balance short-term financial pressures with future retirement needs. 

“Clear, consistent communication, particularly at key moments such as pay reviews or major life events, is crucial to keeping retirement saving on track.”

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