Nearly a third of 8,000 employers did not know if they offer a pension scheme to new employees, and another 18% said they do not offer one in a new government survey, raising questions over the understanding and prioritisation of pensions among employers. 

 

About one in five (18%) said they do not offer any pension scheme to new employees and three in ten (30%) did not know. 

 

The Department for Work and Pensions Employer Survey 2022, covering 8,002 employers in the UK, also found that 42% said they offer a defined contribution pension scheme to new employees, while just 4% offer a defined benefit pension scheme. 

 

Since the roll-out of automatic enrolment between 2012 and 2018, it has been mandatory for most employers to provide a DC scheme to employees aged 22 and over.  

 

For Gail Izat, managing director for workplace at Standard Life, the fact nearly half of employers said they do not offer a pension to new employees or did not know despite a legal requirement to do so shows the topic is low on employer agendas – and that there is a lack of knowledge which makes them dependent on external providers. 

 

“2022 was a tough year for both households and businesses with high inflation starting to take its toll, and it seems that pensions are low down employer’s list of priorities,” Izat said.  

 

“While some respondents could be sole traders, this means almost half of employers are unaware of the pension offering and are likely relying on support from payroll suppliers and others to manage contributions on their behalf,” she observed. 

  

Izat believes employers are overloaded with other worries: “It’s understandable that short-term concerns have outweighed longer-term priorities in recent years, with just keeping the lights on a challenge for a huge number of businesses.” 

 

The shift to DC does however require engagement from employers as well as employees, she adds. 

 

“Financially healthy employees are crucial to the success of any business, and pension saving forms an important part of this. Government and providers both have a big role to play in ensuring pensions are as easy as possible for overworked employers to understand and engage with.”   

 

Auto-enrolment is due to be expanded; the government plans to reduce the eligibility age to 18, having agreed to reform auto-enrolment after a 2017 review. A private member’s bill to that effect is currently making its way through parliament.  

 

Whether the minimum employer contribution will be raised in the near future is questionable, however. It is currently set at 3%, and although the pensions industry has been vocal about wanting to see this increase, the current government has not said if it would support asking employers to pay more. 

   

   

     

Not all employers are against raising contributions. Larger employers would back higher minimum contributions – many already contribute more than 3% – but smaller employers remain opposed, according to a 2022 survey by the Association of Consulting Actuaries. 

   

    

UK employers choose a pension provider for their staff, and the DWP survey shows they look at a range of factors when doing so. Nearly half (48%) cited the ease or convenience of the provider or scheme.  

 

Not much time is going into provider reviews, as more than three-quarters of employers (77%) said they had not switched pension provider or thought about switching. Just 9% had switched or thought about switching, citing as reasons that they had received advice from a professional body, colleagues or fellow employers (36%), wanting value for members/employees (35%), value for money for the employer (33%), or lowering the fees or costs on the employer (31%).