Back to the future?

Posted: 14 February 2023

By February 2018, all employers had to comply with the auto-enrolment requirements of the Pensions Act 2008. The objective was to increase the number of employees who were accumulating workplace pensions - particularly important in the private sector, where the closure of final salary schemes to new entrants and to future accrual was accelerating. Under the new rules, an employee qualifying for auto-enrolment had to make a conscious choice to opt out and forgo prescribed minimum contributions. Employee inertia was expected to counter opt outs, and no attempt was made to revert to an earlier framework of compulsion effected by employment contract.                                                                                 

At one level the policy has worked. Millions of employees are now auto -enrolled. But underlying concerns about employee engagement and the adequacy of contributions are long standing. In the ACA’s 2011 Pension Trends Survey employers gave several reasons why their employees did not join company schemes: cost, lack of interest, disillusion with pensions and preferring the money now rather than later. Similar attitudes can be found today, exacerbated by cost-of-living pressures.

They have to be overcome if contributions are to be increased to meaningful levels which will meet employee retirement expectations. Compulsion, the original model, may not be the right one in current circumstances, but an informed debate now would prevent more pensions disillusion later.

Jane Marshall

Director, Pensions Archive Trust

This article was first published in the February edition of Pensions Age magazine.