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Auto-enrolment risks creating nation of 'pension zombies', says Hargreaves Lansdown

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Paying into an employees' pension fund is a "thankless expense" if no attempt is made to help staff understand and appreciate the contributions made, according to research by financial services firm, Hargreaves Lansdown.

The study found workers are prioritising more immediate financial needs, as they have no financial education.

The study of more than 100 UK employers said the scheme risked creating a nation of "pension zombies" - employees who have no understanding of why they are saving into a pension.

Laith Khalaf Hargreaves Lansdown's head of corporate research, said employees could fall off the savings wagon at the "first bump in the road".

He called for more financial education to be offered in workplaces to help staff understand the need to save for retirement.

"Employers can kill two birds with one stone, getting employees to recognise the money the company pays in, and to consider whether their own personal contributions are adequate," Khalaf said.

"Offering workplace ISAs is one way to get staff thinking about saving in a way that appeals to their short and medium-term goals, creating a stepping stone to considering longer term retirement savings."

No recognition

The study also showed employers are "wasting" £5billion a year in pension contributions following the introduction of auto-enrolment.

Currently £10.7 billion is paid into defined contribution pensions by employers on behalf of their staff every year, yet almost half (46%) of workers don't appreciate the money the company pays into their pension.

Khalaf said: "Employers already pay huge sums of money into pensions for their staff, and auto-enrolment will only add to the bill.

"Getting recognition for this should be a top priority, to maximise the benefit the company gets from that expenditure."

The study also found 76% of employers think they should get more recognition for implementing auto-enrolment.