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How to tackle the growing risk of inadequate pensions

Employers must review their pension and workplace saving strategies, consultant Jason Cannon advised - ©Brian Jackson/Adobe Stock

What steps can HR leaders take to address rising pension inadequacy?

The number of people who are not saving enough for a minimum retirement lifestyle has increased by 1.2 million people in the past year, research from the pensions provider Scottish Widows revealed on 23 July.

In response, most (89%) businesspeople who are responsible for employee pensions predict that their organisations are likely to adopt new HR strategies to help staff achieve retirement adequacy – the status of having enough savings to meet financial needs during retirement – in the next two years. This is according to research conducted last month (18 September) by the Reward and Employee Benefits Association (REBA), a HR community focussed on the reward and benefits sector.

Almost half (47%) of the 155 people polled by REBA – all of whom have pensions responsibilities – view retirement adequacy as an urgent challenge that needs addressing now; a further 28% reported it as an issue to be addressed in the near future. So what exactly must HR leaders do? 

"Raising awareness about the importance of contributions and engaging with your pension is key," explained Lily Megson, policy director at the financial advisory firm My Pension Expert.

Megson told HR magazine: "Workplaces need to offer clear and accessible information about pension schemes, and, where possible, increase their own employer contributions.”


Read more: How can HR departments support younger employees to save money?


For Jason Cannon, benefits consulting adviser for the insurance and risk consultancy Gallagher, “there is no silver bullet to this multifaceted problem, but there are a few common-sense guidelines.”

Speaking to HR magazine, Cannon added: “First, employers must review their pension and wider workplace saving strategies, with a particular focus on contribution design, to ensure that the chosen provider is working hard for employees.”

He then argued that companies should exercise thorough and regular oversight of their pensions provision, using robust governance measures.

Currently, 37% of employers offer between 3% (the statutory minimum required by auto-enrolment) and 4.99%, REBA’s research suggests. 

The UK’s chancellor is conducting a review into defined contribution workplace pensions, aimed at boosting investment, increasing saver returns and making the pensions system more efficient. Findings are expected to be published later this year, ahead of an expected pension schemes bill. 

REBA argues that the review could accelerate improvements to contribution rates, and pensions strategy changes. By 2026, 19% of REBA’s survey respondents believe that their organisations will contribute 10% or more to employees’ pensions. But at the moment, just one in 10 employers provide that level of support. 

The will seems to be there though, as 98% of REBA’s respondents reported wanting to maximise the support available from pension providers. 

Digging into the drivers behind these stats, Jo Gallacher, REBA’s content director, told HR magazine: “There is a growing concern that older employees may not have saved enough for retirement. This can create challenges for employers in managing an ageing workforce, particularly when older workers need to stay employed due to financial necessity rather than by choice.”


Read more: Inadequate pension saving soars


Gallacher added: “Ensuring that employees have sufficient pension savings not only impacts on employees' future security but also influences productivity, engagement, and retention throughout their career.”

Laura Stewart-Smith, head of client engagement for the insurer Aviva, underscored the importance of employer action to plug the retirement adequacy gap. Speaking to HR magazine, Stewart-Smith noted that “employers have a direct influence on pensions adequacy through employer pension contributions.

“The structure of pension contributions within a scheme can help to encourage employees to engage with their pensions and consider whether their own contributions will provide enough for retirement.”

She encouraged employers to signpost staff to employee assistance programmes as well as free governmental help.

REBA’s survey was conducted between June and August 2024. Its team polled 155 professionals with pension responsibilities. Collectively, the people who were polled represent 1.1 million employees. Findings were published on 18 September.