Jerry ButcherMore than a decade ago, auto-enrolment changed the pensions landscape as we know it. As millions of people were brought into workplace savings, pensions were made a core part of the benefits and reward system for employers across the UK.
Now 13 years on, too many employees are still at risk of poor retirement outcomes. While increasing contribution levels will be essential in the long run, financial limitations mean many employers are constrained in the short term. And yet, cost pressures are just one part of the bigger picture.
Our report, Retirement Realities: Unlocking the Workplace Benefits, reveals administrative barriers, compliance uncertainty and process complexities that are holding back UK firms from making changes to improve employee outcomes.
Retirement adequacy remains a workplace issue
Our National Retirement Forecast (NRF) shows that just 30% of full-time employees are on track for a comfortable retirement. Meanwhile, 20% are on track for less than a basic retirement, while a further 29% will only reach a minimum standard.
A core reason for this is that many employees don’t fully understand their pension offering. More than 40% of employees aged 35 and above report limited or no understanding of their employer’s pension scheme, despite being at an age where engagement matters the most.
Yet with 80% of employees stating they are satisfied with their pension benefits, there is a worrying mismatch created for employers where understanding doesn’t meet reality.
Employers want to do more, but feel held back
Our report shows clearly that employers are not disengaged. Most UK businesses are already contributing above the statutory minimum, including more than 70% of small firms, and nearly 90% of medium-to large-size firms.
But when it comes to increasing contributions further, over half cite financial constraints and recent National Insurance increases as barriers to supporting better pension provision. A significant minority also point to administrative burdens as a barrier – around 17% of smaller firms note this, rising to 35% for larger organisations.
For many firms, the immediate issue is not a lack of intent, it is the operational complexity associated with increasing contributions.
What employers can do now
For many employers, the short-term fix doesn’t require a wholesale change to contribution structures. It’s about removing the friction preventing employees from making the most of their pensions today.
Crucially, there are three things that employers can be doing to alleviate this friction:
- Create clear ownership internally – Where pensions sit between HR, payroll and finance, change can stall because no one owns the end-to-end process. Employers can make quick progress by appointing a single ‘pensions lead’ and agreeing a straightforward pathway for improvements: what can be decided internally, what requires provider input, and what needs formal sign-off. And how can your provider help you to drive improve engagement across your workforce?
- Reduce compliance uncertainty – Often, hesitation around change is because of a fear of triggering regulatory consequences or creating an unexpected compliance burden. A quick practical ‘win’ is to schedule an annual governance and compliance session with your provider or adviser. When everything is on the table, you can easily clarify what is mandatory, what is optional and what is simply best practice – creating confidence to speed up decision making down the line.
- Consider salary sacrifice – Despite recently announced policy changes coming in 2029, salary sacrifice is still one of the most underutilised ways to deliver better outcomes for employees without increasing costs. The key for employers is to treat it as an operational rollout, rather than a technical tax exercise: involving payroll early and using clear employee communications to boost take-up.
A call to employers
While auto-enrolment was a vital industry first-step, it was never designed to be the end point. To improve retirement standards across the UK workforce, contribution levels will need to rise over time. But in the short term, the biggest gains for employers may come from removing the friction that stops them from improving outcomes today.
For workplace professionals, this may require some work up front – but will reduce headaches and costs in the long run. These changes will not necessarily require significant spend and can help unlock the ability to deliver better outcomes and a more financially confident workforce.
Jerry Butcher is workplace savings director at Scottish Widows
