Staff contribute average of 5% to pensions


The average employee monthly contribution to a workplace defined contribution (DC)pension scheme in the UK is 5% of their monthly salary, according to research by The Chartered Institute of Personnel and Development (CIPD).

Its Employee attitudes to pay and pensions report, which surveyed 2,255 working adults, also found that 43% of respondents believe they should be contributing more than 10% of their monthly salary to their retirement savings. 

The study also found:

  • Over half of UK workers surveyed have considered how they might work past state pension age, and 13% are worried that they will never be able to afford to leave paid employment. 
  • Almost a quarter (22%) did not know how much they should be contributing to their pension fund
  • 40% of respondents want to reduce their hours gradually from full-time to part-time, and 32% plan to work full-time right up to retirement.
  • Almost a third of respondents are less certain of their retirement future, and 15% have not thought about how they will retire, and nearly two thirds (61%) of respondents have considered working beyond the state pension age in some capacity.
  • Almost half (47%) would like to do so in a permanent job, and preferably in a part-time (31%) rather than a full-time role (16%). One in ten (10%) would prefer to take up employment on a casual, temporary, self-employed or fixed-term basis. 
  • Respondents in medium and large businesses expect to retire at 65, rising to 66 in small businesses and 68 in micro businesses. Those who are not saving through a workplace pension scheme (typically those in smaller businesses) expect to stop work at 67, with 7% anticipating they will have to work past the age of 70. 
  • Just over a quarter (27%) of respondents plan to respond to the new pension freedoms.
  • 13% of respondents plan to increase their pension savings, 6% are bringing forward their plans to retire and 8% are delaying their retirement plans. However, 29% of employees would like to save more because of the changes but cannot afford to.
  • A quarter (26%) of non-enrolled workers would like to join a workplace pension scheme.
  • Scottish respondents are least likely to be in a workplace pension scheme (44% belong to a scheme) compared to nearly three-quarters (73%) of respondents in London.
  • The proportion of workers receiving contributions worth between 1% and 3.9% of their salary has increased from 28% to 31%, while it has fallen for those getting 4% to 9.9% (from 58% to 46%). However, the proportion of those receiving more than 10% has increased from 8% to 12%.

Charles Cotton, reward adviser at the CIPD, said: “The looming pensions changes cannot be ignored any longer. Auto-enrolment has been successful in getting many workers saving through a workplace scheme, but their ability to contribute adequately is being severely hampered by poor wage growth.  

“Until the government and businesses can tackle the root causes of the UK’s productivity challenges, we will not see the wage growth needed to improve individual pension contributions and people may need to stay in work a lot longer to have a sufficient income. 

“Businesses, and HR professionals in particular, need to be prepared for the real possibility that over half of their workforce will want to be employed beyond the state pension age. To support them, and reap the benefits of an age-diverse workforce, they need to think carefully about how they will manage and support these individuals, from training and development through to reward schemes, reasonable adjustments in the workplace and wellbeing support.

“We need a collaboration between employers, employees and the government to ensure that workers are getting the financial information and education they need around retirement planning, and, if they do plan to work to a later age, that they get the support they need in the workplace.

”Many individuals are planning to extend their working lives considerably beyond the average of 66 years. In preparation for this, smaller employers need to review how quickly they can reasonably introduce a pension scheme as well as how they manage, develop and reward their staff. This can include such options as job design, flexible working, performance management and development.

“These efforts will help in attracting and retaining staff as well as helping them to exit the labour market when they want. It’s this kind of action that businesses of all sizes need to be considering, and soon.”