Chris Eastwood, CEO and co-founder at Penfold, a leading digital workplace pension provider, outlines how businesses may be sabotaging their talent retention with poor pension strategies and insufficient support
UK employers invest enormous time and effort trying to improve staff retention, battling skills shortages, rising costs and shifting workforce expectations. Yet many leaders are overlooking one of the simplest and most powerful tools they already pay for: their workplace pension. While wellbeing apps, flexible working policies and culture initiatives can deliver short-term gains, nine in ten employees say their workplace pension influences whether they stay with their employer or move to a new role.
When employees think about their future – including stability, security and the ability to plan ahead – their pension is one of the clearest signals of whether their employer is committed to them for the long term. Despite this, pensions remain firmly in the background, viewed by many employers as a compliance requirement rather than a strategic asset. Our research shows that only 17% of SME leaders set their pension contribution levels as a deliberate senior leadership decision; most simply follow sector norms or accountant advice. By treating pensions as a box-ticking exercise, employers may be unknowingly undermining their own retention efforts.
What is costing employers talent
The disconnect between employer priorities and employee values is becoming increasingly clear. While employees overwhelmingly focus on pensions, over half of SMEs (53.5%) say they give equal or greater priority to other benefits. These include travel assistance, work socials, bonus schemes and salary advances – all of which are rated far lower in importance by employees, according to our report.
This misalignment should not be mistaken for carelessness. Most employers genuinely want to do the right thing. However, because pensions are rarely seen as a day-to-day priority, they’re often overlooked when leaders review benefits strategies. The result is a growing ‘retention gap’. While most SMEs offer only the statutory minimum contribution, for the majority of employees this baseline is no longer enough to inspire long-term loyalty.
In fact, 95% of employees believe that a standard 3-4% employer contribution is insufficient to keep them at a company over time. Our findings show that the retention threshold – the average employer contribution level that influences a person’s decision to stay – sits at 9.5%. Falling short of this mark doesn’t just affect pension outcomes; it weakens the emotional connection between employees and their employer.
Understanding pensions can be a hidden barrier
A pension can only act as a powerful retention tool if employees understand its value. Today, many struggle to engage because pensions are treated as a background process, tucked away in outdated portals or only referenced in annual statements. This lack of visibility is often misread as a lack of interest. In reality, the data suggests employees want to feel more connected to their savings.
When asked what they value most in a pension provider, 32% of employees cited instant access – the ability to check their pension pot whenever they want – as their top priority. This ranked higher than strong investment returns (31%) or ethical investment options. The message is clear: retention isn’t only about how much employers contribute, but how clear and tangible the benefit feels. By moving away from invisible pension schemes and adopting modern, accessible technology, employers can turn a compliance requirement into a daily demonstration of long-term support.
Unlocking a greater return on investment
Employers don’t need to overhaul their entire benefits strategy to unlock more value from pensions. The biggest gains come from improving visibility, communication and perceived value, helping employees understand what they have, how it works and why it matters.
Bringing pensions into the foreground makes the benefit feel real. It shows employees that their employer is investing in their future, not just meeting a legal minimum. Contribution structures that move closer to the 9.5% retention threshold, combined with clear and accessible communication, help employees connect their pension to long-term wellbeing.
Far from being a cost to minimise, workplace pensions can become one of the fastest and most cost-effective ways to strengthen retention. Employers are already paying for it – and in a labour market where stability and security matter more than ever, it’s a tool no organisation can afford to ignore.