More than half (53 per cent) of UK employees would increase their pension contributions if their employer offered matching contributions, but just 14 per cent of small and medium-sized enterprises (SMEs) provide a matching structure, research from Penfold has shown.

Penfold’s Retirement Reality Check report, based on surveys of 2,000 UK employees and 500 SMEs, highlighted a disconnect between employee appetite to save more and employer pension strategies.

According to the research, 47 per cent of employees were contributing the statutory minimum, while the majority of SMEs (53.6 per cent) were also contributing just the legal minimum of 3 per cent in employer contributions.

The report suggested this gap represented a missed opportunity to improve financial well-being and retention, particularly as pensions continued to rank as the most valued workplace benefit.

Indeed, 90 per cent of employees said their workplace pension influenced their decision to remain in their job, while 88 per cent said it was important when deciding whether to join a new company.

However, employer perceptions appeared misaligned. Just 23 per cent of SMEs ranked pensions as their top priority benefit, with more than half saying other benefits were of equal or greater importance.

Penfold CEO and co-founder, Chris Eastwood, noted that employees were ready to act but needed employer support.

“Employees are ready and willing to save more for their future; employers just aren’t meeting them halfway,” he stated.

“The ambitions to save are there, but employees can’t do it alone. Similarly, employers are missing opportunities when it comes to supporting their staff with the benefits they currently offer across their workplace.”

Eastwood added that pensions were often underestimated as a retention tool.

"Our findings show that 90 per cent of employees already say their pension influences whether they stay in a role," he said.

“Yet while businesses routinely invest in other benefits, only 4 per cent say they genuinely can’t afford to contribute more than the minimum. Addressing pension awareness can help employers capitalise on an overlooked opportunity.”

The research also found that 95 per cent of employees believed a 3-4 per cent employer contribution was insufficient to retain them, while the average contribution employees said would positively influence their decision to stay was 9.5 per cent.

“Employer matching is one of the simplest, most impactful changes UK businesses can make,” Eastwood continued.

“Financial security is a top priority for people across the country in today’s current climate.

"Employers that step up by offering matching contributions aren’t just helping people build a better retirement, but also strengthening morale, boosting retention and signalling that they care about their team’s long-term wellbeing.”

He also warned that sticking to minimum contributions could pose a talent risk.

“With 95 per cent of employees saying the typical 3-4 per cent employer contribution isn’t enough to keep them, the message is unambiguous: doing the minimum is no longer good enough. Sticking to bare minimum contributions risks losing talent.

“Most small businesses simply haven’t revisited their pension decision in years or haven’t connected their contribution strategy to retention,” he added.

The report also highlighted broader engagement challenges, with 58 per cent of employees unsure of the current value of their pension pot and 49 per cent unaware of how their pension was invested.

Eastwood concluded that, with only one in seven SMEs matching contributions, businesses nationwide were missing a clear opportunity to boost employee retention and long-term financial resilience at minimal additional cost.

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