UK Update: Auto-enrolment – from the first decade to the next

In 2013 I wrote a blog called ‘Auto-enrolment One Year On: A Happy Anniversary?’. Now that auto-enrolment is celebrating its 10-year anniversary, I find myself reflecting again. So 10 years on, how has it gone?

When I wrote that blog in 2013, the general consensus was that the first year had been a successful one in terms of pension saving. However, I mentioned the many challenges faced by employers implementing auto-enrolment: increased costs, and management and administration time spent assessing workforces for eligibility, implementing processes and drafting employee communications.  SMEs were just approaching their staging dates and we were yet to see the impact of auto-enrolment on smaller employers.

10 years on then, what can we say? Auto-enrolment (and re-enrolment) has been, and continues to be, successful in increasing the number of individuals saving into a pension, and doing so earlier than they might have otherwise. Surely that was the number one aim of auto-enrolment in the first place? Over 10 million individuals have been auto-enrolled into a workplace pension, and far fewer than anticipated have opted out. However, this does not mean that pensions are promising adequate retirement income for most. Many believe that minimum auto-enrolment contributions should increase as a starting point. And there are still lots of people missing out on auto-enrolment, in particular the youngest age groups, self-employed and the lowest earners. In its latest report the House of Commons Work and Pensions Committee has made several suggestions to address the current challenges in pensions saving. It is hoped that this will result in a co-ordinated effort across the Government, pensions industry, employers and wider public.

Going forward the focus should not just be on auto-enrolment though, but on wider engagement with pensions, saving for retirement and helping remove the barriers to individuals thinking at an early stage about their financial health in later life. These are not new concepts, but are ones which take time to achieve.

Pensions engagement is hard in the current climate, although the cost of living crisis puts the focus on getting through the present rather than planning for the future, even small interactions can create a more positive view of pensions.

For many companies, the ability to offer an attractive pension package may seem like an unaffordable luxury just now. There can be opportunities here though – pensions can (and should) represent a solution rather than being another problem to solve.

I am not planning on writing an ‘Auto-enrolment 20 years on’ blog in 2032, but let’s not stop here. The successes of auto-enrolment can be built on and its reach extended. Let’s combine that with a continued focus on pension saving generally, encouraging enthusiasm for and engagement with saving for retirement, and a programme of education for saving for later life, all sensitive to the current cost of living crisis. Easier said than done no doubt, but let’s try.

By Burness Paull LLP, Scotland, a Transatlantic Law International Affiliated Firm.  

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