The cost of living is driving people out of their workplace pension, with more than a quarter (26%) of large employers in the UK reporting an increase in the number of opt-outs.
Research by Cushon found that the cost-of-living crisis was also responsible for more than half (52%) of employees reducing non-essential spending and nearly a third (29%) no longer saving money.
Steve Watson, its director of policy and research, 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.”
The workplace savings and pensions provider carried out the survey among businesses with 500-plus staff members as part of a new whitepaper which will be released in June. It believes that while the overall number of opt-outs is low now, with just 5% of employees currently choosing to do so, there could be a UK-wide savings crisis in the future when these people approach retirement age if the trend continues.
Cushon is therefore urging employers to implement financial education tools to encourage their workforces to keep saving money so they can have enough money to adequately fund their retirement.
Watson added: “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.
“They 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.”
The survey also found that 84% of employees with a company pension think greater financial education on how their pension works is important, while more than three in five (61%) want their employer to offer salary sacrifice.