Hargreaves Lansdown research claims that £5 billion of company pension contributions are being wasted and that employers think they deserve more credit for implementing auto-enrolment.

Hargreaves says that:

• Employers are wasting £5 billion in pension contributions each year
• Employers think half of workers don't appreciate company pension contributions
• 70% of employers put this down to staff prioritising more immediate needs
• 47% of employers think more workplace savings options, like Isas, could help
• 76% of employers think they should get more recognition for implementing automatic enrolment
• Automatic enrolment risks creating a nation of 'pension zombies'

Laith Khalaf, head of corporate research: "Automatic enrolment is a necessary and positive step, but it is not a silver bullet. It risks creating a nation of pension zombies who don't know what they are saving, or why. Unless auto-enrolled workers get help to answer these questions, they won't appreciate the money their employer is paying in for them, and will always be in danger of falling off the savings wagon.'

Wasted contributions
Companies currently pay £10.7bn into defined contribution pensions on behalf of their staff each year. Yet employers think almost half (46%) of workers don't appreciate the money the company pays into their pension. From the employer's point of view, £5 billion of these contributions are therefore wasted.

Automatic enrolment
Automatic enrolment is set to increase employer pension contributions by £5.5billion (DWP). Furthermore set up costs are estimated to be £15.4billion for UK businesses, according to CEBR (Centre for Economics and Business Research). HL says: "This is an awful lot of money for employers to hand over without getting anything in return. Companies need to think how they can use automatic enrolment as an opportunity to get some recognition for their efforts.

"Employers are clearly not confident they can do this. 69% do not think automatic enrolment will be beneficial for their business in the long term. 76% think they should get more recognition for implementing auto-enrolment."

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What employers can do
Paying company contributions into a pension is a thankless expense if no attempt is made to help staff understand and appreciate those contributions. By putting in a little effort into this task, companies can make that money go a lot further. Some 73% of employers thought financial education in the workplace could help and some 47% of employers thought more workplace savings options like Isa could help.

Laith Khalaf, head of corporate research, said: "'If employers help their staff understand the need to save for retirement they can kill two birds with one stone: getting them to recognise the money the company pays in, and to consider whether their own personal contributions are adequate. Offering Workplace Isas is one way to get staff thinking about saving in a way that appeals to their short and medium-term goals, creating a stepping stone to considering longer term retirement savings.'

'Pension zombies' aren't committed pension savers
HL research suggests that half of employers will pay in just the bare minimum required by law. HL said: "This is a good start, and certainly an improvement on the current situation. However automatic enrolment risks creating a nation of pension zombies who don't understand how much they are saving, or why. These workers won't appreciate if they need to save more, which is likely to be the case."

However, HL added: "More worryingly, they may fall off the savings wagon at the first bump in the road. 70% of employers think their staff don't appreciate pension contributions because they prioritise more immediate financial needs. Should these needs materialise after they have been auto-enrolled, workers will be inclined to stop pension contributions, if they don't understand why they are saving.

HL surveyed 100 employers of all sizes for their views.