Almost half (46%) of defined contribution (DC) savers revealed that they do not understand one of the key benefits the scheme brings, according to new research from TPT Retirement Solutions.
The workplace pension master trust scheme’s research, which polled around 1,500 DC savers, highlighted that savers are not aware they receive tax relief on their contributions, which is money from the government that they can claim when saving into their pension.
In addition, some DC savers do not understand workplace contribution levels and how they work, as almost one in five (24%) are unaware that they can change their contribution levels. Meanwhile, almost two-thirds (62%) who are eligible for a higher employer contribution once they opt-in are only receiving the minimum amount, and a further 9% are unaware that their employer is contributing to their pension.
According to TPT Retirement Solutions, the findings suggest a need to further engage employees on how DC pensions work and on how to get the most out of a workplace pension.
Philip Smith, DC director at TPT Retirement Solutions, said: “DC pensions put responsibility for a member’s financial future firmly in their own hands. Helping people understand how workplace pensions work is therefore essential. If we want savers to take an active role in their retirement planning, it’s imperative that employers and all trustees provide them with the right information, tools, and support to enable them to make informed decisions.
“Over the last few years, improving member understanding of their DC pension has been one of our top priorities. We’ve introduced an extensive suite of support, initiatives, and educational tools for DC savers. We’re now finalising our plans for the next phase of development, including developing retirement solutions that better support members and make retirement simpler when they’re ready to start accessing their pension savings.”