Both employers and employees in the UK are facing novel and evolving challenges for 2025. Employers are being hit with changes from April that will increase costs of employment — requiring skilled planning and mitigation to minimise disruption.
In addition, employees are facing issues of their own. Most will be concerned about earning enough for retirement and may bear some of the burden of their employer’s additional costs.
Having sufficient funds for retirement will be a growing problem more specifically for females. The already prominent pension gender gap is growing and remains challenging to successfully equalise.
Mid-life employees (ages 44-54) are likely to find their pensions further impacted than other generations. This is due to the likelihood of being caught in the gap between the decline of final salary pensions, and the introduction of employer contributions into a defined workplace pension becoming mandatory.
Employer National Insurance increase from April 2025
There are multiple expenditure increases for employers on the horizon. Employers are facing elevated people costs that are likely to affect businesses plans, goals, and expectations for 2025 and beyond.
Employers National Insurance contributions will increase to 15% in April. This is compounded by the threshold of National Insurance being lowered and the National Living Wage also being raised. Lockton research shows (opens a new window) that employer NI changes alone will see employers paying an additional 2.61% for each employee.
Ostensibly, these economic changes will impact talent recruitment and retention. Employees — already contending with a cost-of-living crisis that emerged over recent years — will now have to accept employers will have no choice but to scale back any planned pay increases. Furthermore, employers may have to roll back proposed improvements to the pension contribution structure they offer to their employees.
Pension inadequacy for ‘midlifers’
Mid-life employees may have been caught in a gap of missing out on both final salary arrangements, as well as, proactively participating in their employers’ defined contribution workplace pension — before it became mandatory.
All of this will of course lead to greater challenges for employees in trying to build funds they require for retirement. Additionally, in the coming years, increased employer costs may negate the positive effects from the introduction of automatic enrolment.
Gender gaps within pensions
Income inequality between men and women is stretching beyond career earnings and affecting pensions and savings, too. In the UK, women are typically retiring on significantly lower incomes than men. Among pensioners today, women have annual incomes of £7,100 — 40.5% lower than men (opens a new window). While, the pension gender gap is narrowing, there is still progress to be made to reach parity.
Women have a longer life expectancy than men. As a result of this, women will need to live off their retirement income for a much longer period. Recent research carried out by NOW Pensions (opens a new window) shows that women need to work an extra 19 years to retire with the same pension amount as men.
There are multiple reasons for the disparity in pensions between genders, some of these include:
Lower female employment rates
Women constituting more of the part-time workforce
Fewer women in leadership roles
Women tending to be less engaged with finances
While employment inequalities remain in the UK, effective education and engagement measures are essential to helping bridge the pensions gap.
Benefits for Breakfast
The Lockton Pension & Workplace Savings Team, alongside Hymans Robertson, will be exploring these three key issues at our Benefits for Breakfast event, on 26 March.
Our discussions on these issues seek to equip employers with insights that will enable them to better support the unique needs and circumstances of their staff.
To register your interest for the Benefits for Breakfast event, please click here. (opens a new window)
