Despite evidence that the shortfall in retirement savings in the UK is currently more than £27 billion, few employees in the UK appear concerned about their pensions and most are satisfied overall with the pension benefits that are being provided by their employer.
A study by Mercer HR Consulting found that only 22 per cent of employees were concerned about their pension provision. Workers in the NHS were the least concerned, with on 15 percent expressing any worries. Workers in manufacturing had the highest level of concerned employees at 25 per cent.
Age makes little difference when it comes to worrying about pensions with only a four per cent difference between the most worried (34-44 year olds) and the least (16-24 year olds).
Dr. Patrick Gilbert, head of Organisational Research and Effectiveness at Mercer, said today that he suspected many employees were in a state of denial:
”It makes them nervous to think that they could face financial difficulties in retirement, and many are confused by the increasing complexity of financial choices they have to make,” he said.
The shift to defined benefit pensions does seem to be having an effect when looked at from an employee’s length of service in a company. Nearly 80 per cent of those with over 15 years’ service said their pensions were good compared to 63 per cent of those with less than two years’.
Despite repeated warnings that the Government are not communicating the potential risks of pension well enough, seven in 10 respondents to the survey said that they can easily find answers to their pension questions, and six in ten said their organisations were good at communicating pension issues.
However, Gibson today warned that employees did not know as much as they thought they did and outlined reasons why they should be worried about their pensions even though they seem undeterred:
”Pensions are inherently complex, and they have changed dramatically in recent times. The fact is that most employees are not well informed about their retirement income, and assume that things will somehow work out for the best. Employees don’t know how much they truly don’t know,” he said.
According to Gibson, the £27 billion shortfall in savings is exacerbated by the increasing number of organisations are changing from defined benefit to defined contribution schemes, therefore shifting a greater portion of responsibility and risk to employees. In addition, employer payments to new defined contribution schemes are often lower than to defined benefit schemes. The currently average is 12 per cent for the latter and 6 per cent for the former.