Around a fifth of workers at small medium sized (SMEs) enterprises that are eligible for a workplace pension are not participating in schemes, a new research shows.
Analysis of the Department for Work and Pensions (DWP) data from Broadstone found nearly 1.2 million SME employees could be falling through the "pension accumulation gap".
It also found pension participation is "stalling" at SMEs, warning employers at these companies to help boost member participation.
Broadstone estimates that around 20% of workers eligible for a workplace pension are not participating at firms with between five and 49 members of staff, equivalent to 803,000 people.
Additionally at businesses with 50 to 249 staff, 12% of eligible employees are not participating.
That marks around 374,000 non-savers, meaning staff are missing out on billions of pounds of "free money", Broadstone, which provides independent specialist pensions, said.
In total, private sector employers contributed £37.5bn ($45.4bn) to pension savings in 2021 with employees benefitting from a further £7bn via tax relief.
Broadstone warned savers who are not partaking in their workplace scheme risk a lower income and quality of living in retirement.
Rachel Meadows, head of pensions and savings at Broadstone, said: "It is clear that employees at smaller organisations are falling through the cracks at a greater rate than among larger employers.
"Boosting pension participation among colleagues is a key duty of employers in a post auto-enrolment environment as it is critical to protecting the long-term financial future of their colleagues. There is a benefit for smaller businesses too – it helps them attract and retain talent if workers know their employer is achieving best-practise standards in line with bigger organisations.
"Employers should be taking steps to increase communications and provide sources of guidance on the benefits of pension saving to make clear the responsibilities individual pension savers bear as well as the vast financial contribution that employers and the government will also make.
"With pensions being one of the biggest employee benefit costs for most employers, allocating a small extra spend on boosting staff knowledge can reap a big reward. This is the key to improving understanding, and therefore engagement and participation, among employees and ultimately aligning participation rates with larger employers."
It comes as the chair of John Lewis, Dame Sharon White on Monday called on the government to encourage retirees, mostly those in their 50s, to return to the workforce.
White warned that staff shortages meant more inflation was inevitable, and urged people who retired during the coronavirus pandemic to go back to work to help the UK economy avert a recession.
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