Most employees don’t really understand their pension. That’s increasingly an employer problem
Ask most employees whether they know what their pension pot is worth, what fund it’s invested in, or how much income it might generate in retirement, and the honest answer from the majority will be that they have no real idea. Auto-enrolment got them saving. Nobody ever really explained the rest.
That gap between participation and understanding has always been there. What’s changed is the legislative backdrop, the scale of financial stress in the workforce, and the growing expectation from employees that their employer will do something about it.
Financial stress at work is worse than most HR teams realise
The Zellis Financial Wellbeing Report 2025, which surveyed 2,500 employees and 500 business leaders across the UK and Ireland, found that 92% of employees had experienced financial stress in the past year. Of those, 89% said it had affected their working lives. Almost half said financial anxiety made it harder to focus at work, and more than a quarter said it reduced their productivity directly.
Those figures are striking enough on their own. What’s perhaps more surprising is that only 12% of business leaders reported being entirely free from money worries themselves. This isn’t a problem confined to lower-paid or junior workers.
The FCA’s Financial Lives 2024 Survey puts some wider context around this. Around 13.1 million UK adults, roughly one in four, have low financial resilience. One in ten has no cash savings at all. Among those with a defined contribution pension, a third have less than £10,000 saved.
The Money and Pensions Service has found that more than two thirds of UK employees want more financial support from their employers. According to CIPD research published in 2022, only 18% of organisations had a financial wellbeing policy in place. That same research found that 33% of employers had already seen a rise in demand from employees for this kind of support, and given the cost-of-living pressures since, that number is unlikely to have moved in the right direction.
The business case isn’t complicated
When employees are financially stressed, they are less productive, take more time off, and are more likely to leave. The Zellis research found that 78% of employees say they contribute more to their employer when they feel confident about their finances. For any HR team making the case internally for a financial wellbeing programme, that single figure tends to land well in a boardroom.
The CIPD’s 2022 Reward Management research also found that employees working for an organisation with a financial wellbeing policy were far more likely to say their employer had a positive effect on their financial wellbeing (71% versus 45% for those without). They were also more likely to say they felt in control of their finances and to report a good level of overall benefits.
For smaller businesses without a large HR or reward function, none of this has to mean commissioning an expensive benefits overhaul. The starting point is usually much simpler.
Why pensions have become more pressing than usual
Auto-enrolment has been a genuine success story. Between 2012 and 2022, participation in workplace pension schemes among eligible employees rose from 55% to 88%, according to the Department for Work and Pensions. But getting enrolled and actually understanding what you’re enrolled in are two different things, and for most employees, the second part never really happened.
Two significant pieces of legislation have made this a more urgent conversation for employers.
The Pension Schemes Act 2026
The Pension Schemes Act 2026, which received Royal Assent on 29 April 2026, is the most far-reaching reform of defined contribution pensions since auto-enrolment. DC scheme trustees will now be required to offer members default pension benefit solutions, meaning a structured way to receive retirement income without having to make complex choices independently. A new Value for Money framework will require schemes to assess and publicly report the quality of outcomes they deliver. Dormant pension pots worth £1,000 or less will eventually be automatically transferred to authorised consolidator schemes.
The practical effect is that more decisions will be made on employees’ behalf as time goes on. That’s not necessarily a bad thing, but it does put a premium on employees actually understanding what is happening with their money, why, and what choices remain available to them.
Inheritance tax and pensions from April 2027
There is a second development that has had considerably less coverage in the mainstream press but carries real implications for a significant number of employees. The Finance Act 2026, which received Royal Assent on 18 March 2026, brings most unused pension funds and pension death benefits within the scope of inheritance tax from 6 April 2027.
Under current rules, most unspent pension savings pass outside of the estate entirely on death, making pensions a commonly used and legitimate element of estate planning. From next April, that changes. HMRC estimates that around 10,500 estates will face an inheritance tax charge that would not have arisen under the old rules, and a further 38,500 will pay more tax than they previously would have. For employees who have built up meaningful pension savings and have relied on those savings as part of their estate planning, this is a material change. Many will not be aware of it at all. Signposting it through the workplace, and pointing people towards free guidance, is something employers are well placed to do.
Financial education versus regulated advice: the distinction matters
A common reason employers hold back from engaging with this topic is concern about straying into regulated advice territory. It’s a legitimate concern, but the line is clearer than many assume.
Regulated financial advice is personalised. It takes an individual’s specific circumstances into account and makes explicit recommendations. That requires FCA authorisation. Financial education does neither of those things. As Phil Sandford, head of financial education at Standard Life, has pointed out, only around one in ten people actually needs regulated advice. For the majority, education and impartial guidance goes a long way towards building the confidence they need to make their own decisions. Employers can provide this kind of education without FCA authorisation, as long as the content doesn’t cross into personalised recommendations.
What a pension education programme might actually cover
The topics that tend to be most useful to employees are not especially complex, but they do require someone to explain them clearly. A reasonable starting point would include how workplace pensions actually work, how tax relief is applied, and what salary sacrifice really means for take-home pay. Beyond that, there’s real value in helping employees understand why the timing of contributions matters so much over a long working life, and how to think about what a pension pot translates into as actual retirement income rather than just a savings balance.
In the current environment, it’s also worth including some plain-English explanation of the Pension Schemes Act 2026 changes and the inheritance tax reforms coming into force in April 2027. Both are genuinely relevant to employees, and both are topics most people will have had no opportunity to learn about elsewhere.
For employees aged 50 and over who are thinking about retirement, Pension Wise offers free government-backed guidance appointments and is one of the most underused resources available. Signposting it costs nothing.
What works well for a 24-year-old starting their first job is unlikely to land in the same way for someone ten years from retirement. The most effective programmes are those that reflect the different financial stages a workforce spans, rather than delivering the same content to everyone and hoping it sticks.
Where to start if you’re a smaller employer
Building a programme from scratch is not the only option, and for most employers it shouldn’t be the first instinct. The pension provider is a significantly underused resource. Whether that’s NEST, a master trust, or a contract-based scheme, most providers have communications materials, member-facing explainers, and in some cases webinar programmes that employers can access and use. For SMEs in particular, this is usually the most practical starting point.
MoneyHelper, the government-backed service delivered by the Money and Pensions Service, provides a wide library of free and genuinely impartial resources on pensions, budgeting, and retirement planning. Employers can simply point employees towards it. No budget required.
For organisations that want to go further and offer structured e-learning or something that works consistently across a dispersed workforce, specialist financial wellbeing platforms exist specifically for this purpose. They’re worth exploring once the basics are in place.
The window for deferring this is closing
Two significant pieces of legislation have landed within weeks of each other. Financial stress across the UK workforce is at levels not seen before. Employees are actively asking for more support. And the practical steps involved in getting started are less complicated than most employers assume.
For HR teams and business owners who have put this in the “nice to have” category, the case for moving it up the priority list has rarely been stronger.
Free and impartial guidance on pensions and financial planning is available from MoneyHelper, the service run by the Money and Pensions Service. Employees aged 50 and over can book a free Pension Wise guidance appointment to discuss their retirement options.