Nest Insight

September 2022

Research by Nest Insight explored the current employer pension contribution landscape in the UK.

It found that many employers offer above-minimum employer contributions, but these are often not directed to those who may be most in need:

  • Around half of large employers offer more than the minimum, compared to a quarter of small organisations.
  • Employers are more likely to offer above-minimum contributions if they predominantly have employees that are higher earners or higher skilled.
  • Nearly 2 in 3 employers say that their organisation is unlikely to voluntarily implement a different approach to pensions contributions in the next two to five years. This rises to 3 in 4 among smaller employers. The current challenging economic context, the inflexibility of legacy systems and the complexity of some employers' pension provision all act as strong barriers.
  • Employers are most interested in innovations that help employees to contribute more without necessarily requiring higher contributions from themselves, such as:
  • - Salary sacrifice: 2 in 3 employers thought a salary sacrifice approach was appealing in which tax savings could potentially be added to pension contributions to boost the employee's retirement saving.
    - Auto escalation: 5 in 10 employers liked the idea of an auto escalation approach in which an employee can commit now to automatically increasing their pension contribution in future, for example when they get a pay rise or after a year.
    - Hybrid approaches: Around 4 in 10 employers thought combining pension saving and other forms of saving was appealing, for example a hybrid 'sidecar saving' model where employees build up a pot of liquid emergency savings alongside their retirement savings.
    - Higher default with the option to opt-down: Around 1 in 3 employers found this approach attractive. In this model, employees could choose to opt down to minimum contributions from a higher default, rather than them having to opt in to making higher contributions.

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