A quarter (26%) of large employers have seen an increase in the number of pension scheme opt-outs among employees in the face of the cost-of-living crisis, according to research by Cushon.
The research, conducted among more than 2,000 UK organisations employing 500-plus employees, found that pension scheme opt-outs were one of a number of cost saving measures, including cutting down on non-essential spending (52%).
Overall, 5% of employees were found to have actively opted out of their organisation’s pension scheme; while this number is relatively low, Cushon expressed concern about a future savings crisis if this trend were to continue.
The majority (84%) of those with a workplace pension agreed that increased financial education around pensions would be helpful. More than three-fifths (61%) wanted their employers to offer salary sacrifice options, which could save someone with a £30,000 salary approximately £180 per year in national insurance payments, according to Cushon.
Steve Watson, director of policy and research at Cushon, said: “Understandably, the cost-of-living crisis is forcing people to cut back on spending wherever they can and although pension opt-out rates remain relatively low, they are at risk of spiking the longer the crisis goes on as it becomes more likely that employees consider opting-out and putting their future financial health in jeopardy.
“When finances are stretched, people look to reduce costs on the things they believe aren’t offering value for money. Unfortunately, for too many people, pensions fall into this category and this is down to a lack of understanding and engagement with employees.
“Employers need to do more to ensure that not only are they educating employees about the advantages of their pension but also encouraging them to keep saving by raising the employer contribution. Without steps such as this, the numbers of people opting-out of pensions could increase.
“[Employers] can also introduce salary sacrifice, which is a great way to help their employees save money and make their pay go further. Initiatives such as this could prove pivotal in keeping the UK saving during the current crisis.”