Nearly 1 in 10 employees are opting out of workplace pensions in 2025. For HR leaders, this isn’t just a retirement issue; it can signal financial stress, disengagement, and longer-term risks to workforce resilience. Understanding why employees walk away from pensions, and how HR can respond, is more important than ever.
Last year, around 89% of eligible employees were enrolled in a workplace pension – a significant improvement over previous years. Yet almost 10% still chose to opt out. In the third quarter of 2024–25, 9.9% of new savers declined participation. Cost-of-living pressures remain a major factor, particularly for employees living from pay to pay, where every immediate expense feels critical.
Opting out isn’t trivial. Employees turn down employer contributions and tax relief, leaving potentially thousands of pounds on the table over their working lives. The Government estimates that opt-out rates could reach 30% in some groups, particularly lower earners or those with irregular work patterns, highlighting a structural challenge for HR teams.
It’s about more than money
Financial strain is a key factor, but it isn’t the only one. Many employees simply don’t fully understand how pensions work or feel that small contributions won’t make a meaningful difference. Others prioritise immediate needs, such as rent, bills, childcare, over long-term savings.
Demographics also influence opt-out rates. Younger employees, part-time workers, and women returning from career breaks are more likely to opt out, often due to lower incomes, disrupted career paths, or less disposable cash. Recognising these differences allows HR leaders to develop tailored interventions rather than relying on a one-size-fits-all approach.
What HR leaders can do
HR teams have a real opportunity to reverse this trend by educating and supporting employees. Effective strategies include:
1. Clear, simple communication
Explain pension benefits in plain language, highlighting employer contributions, tax relief, and the long-term growth potential of even modest contributions. HR teams could send short explainer videos or use infographics to make abstract concepts tangible. For example, showing how £50 a month can grow to over £30,000 in 20 years can make a real difference.
2. Personalised guidance
Offering one-to-one sessions or access to impartial financial advisers allows employees to ask questions about contributions, investment options, and the compounding effect over time. Several UK employers report that employees who attend these sessions are more likely to stay enrolled and increase contributions gradually.
3. Targeted support
Focus on groups most at risk of opting out. Younger employees, part-time staff, or those returning from career breaks may require extra encouragement or flexible options, such as adjusting contribution levels or offering digital tools to model different scenarios.
4. Integrating financial wellbeing initiatives
Workshops, online resources, and budgeting tools can help employees manage short-term pressures without sacrificing long-term savings. A large professional services firm introduced a blended approach combining webinars, a digital budgeting app, and one-to-one coaching. Within six months, participation in the pension scheme rose by 12%, and employee surveys showed improved confidence in managing money.
Measuring the impact
HR leaders should track the effectiveness of interventions to ensure resources are well-targeted. This can be done by monitoring participation and contribution rates in workplace pensions over time, analysing engagement with financial wellbeing resources, and reviewing employee surveys that measure confidence and financial stress.
Retention and absenteeism data can also reveal whether interventions are improving broader workforce outcomes. Collectively, these insights not only highlight successes but also identify areas requiring additional support, allowing HR teams to refine initiatives and maximise long-term workforce resilience.
The long-term impact
Walking away from a workplace pension can have serious long-term consequences. Missing out on employer contributions and tax relief can drastically reduce retirement savings. Even modest contributions left unchecked over decades can grow into a meaningful pot, making early engagement critical.
High opt-out rates may also reveal broader wellbeing issues. Staff struggling financially are more stressed, less engaged, and at a higher risk of turnover, which impacts team performance and organisational costs. Recognising these early can help HR leaders address root causes before they escalate.
Turning a red flag into an opportunity
Opting out doesn’t have to be a warning sign. Instead, it can be a catalyst for positive change. By understanding why employees disengage and offering tailored, practical support, HR leaders can help staff stay engaged, strengthen their financial resilience, and build a more secure workforce.
The right interventions today, like clear communication, personalised guidance, targeted support, and wellbeing initiatives, can pay dividends for employees, teams, and the organisation as a whole. In a rapidly changing workplace, tackling pension opt-outs proactively is not just about retirement planning; it’s about building a workforce that is confident, engaged, and financially resilient.
Ray Law is the co-founder of moneyappi, a UK-based fintech company dedicated to enhancing financial wellbeing in the workplace. With over a decade of experience in the wellbeing industry, Ray is passionate about creating practical, impactful solutions that empower employees to achieve financial stability and peace of mind.
