Successfully engaging people with their pensions could result in “unintended consequences”, particularly given the current economic environment, Aon has said.

Although Aon highlighted UK Pensions Awareness Week as an “opportunity” for the financial industry to connect with people and encourage active engagement with retirement savings, it acknowledged the difficulties presented by to the current cost-of-living issues.

Among the issues highlighted by Aon was the possibility that individuals could be more inclined to cease their contributions or request early access to their pension savings.

The firm explained that, while these options may provide short-term financial relief, they would be likely to have a negative impact on longer-term retirement plans and may result in people having to delay their retirement several years.

In light of this, Aon emphasised the need to get the balance right and make sure people have the information they need to make better-informed decisions.

Aon also highlighted statistics from its 2021 Defined Contribution (DC) and Financial Wellbeing survey, which detailed the difficulties some savers are facing, with one in four respondents not able to come up with £1000 in an emergency.

Aon partner, Karina Klimaszewski, commented: "Pensions Awareness Week is a tremendous initiative that highlights the vital importance of retirement saving. That importance is never going to go away - but some of the current financial challenges that people face should be more temporary.

“Unfortunately, in the current environment of higher inflation and its impact on the cost of living, more and more people are likely to be facing challenging financial decisions amid increased volatility.

"Employees may soon be struggling to pay their bills, let alone having enough money to put into their pensions. But we know that lowering contributions or having a contribution break, can have a significant impact on retirement outcomes.”

Klimaszewski highlighted recent reductions in contributions as an example of this, explaining that those who are running schemes need to ensure they are supporting members in the way that meets savers' diverse needs.

"They will need to think about how to re-engage people who may either decrease contributions or opt-out of making contributions altogether, and then think about how to get them back to contributing at a reasonable level and at the right time," she continued.

“For example, in the future, schemes may want to consider auto-escalation – where employees’ pension contributions are automatically increased - for those who reduced their contributions.

"In any event, once the current high inflation environment has stabilised, good communication will be vital for fully re-engaging members.

“We hope that this year’s Pensions Awareness Week acts as a prompt for employers and schemes to focus on signposting all the help that is available for members to help build their resilience.

"This could be a great opportunity to engage with members, directing them to tools and support that enable them to make better decisions and give them help when they really need it - and when they will value it most.”

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