The UK’s auto-enrolment pension plan is working – but there are problems
The latest figures from the Department for Work and Pensions show that auto-enrolment has been a transformative success in increasing pension participation, with 89% of eligible employees now saving into a workplace pension, representing some 21.7 million people in 2024.
But beneath these strong figures, the picture is more complex, says Jon Greer, Head of Retirement Policy at Quilter.
“A growing number of employees are now saving via auto-enrolment ‘by stealth’, driven by the frozen £10,000 earnings trigger and refined data from the ONS showing a greater proportion of higher earners—both contributing to broader coverage,” he said.
“While overall participation continues to rise, opt-out behaviour among newly enrolled savers continues to be more volatile. Specifically, the proportion of individuals who actively opted out after newly starting to save into a workplace pension has been in the range 8–10% range over the past two years; historically higher on average than in previous periods, with the overall trend of opt outs increasing over the last 10 years.”
At the same time, auto-enrolment policy is facing an inflexion point. While participation rates are commendably high, contribution levels remain far below what’s needed for most individuals to retire comfortably, said Greer.
The figures show that employer contributions continue to dominate, making up 62% of total pension contributions in 2024. Meanwhile, employee contributions make up 29%, with income tax relief contributing the remaining 8%
“The government’s plans to revive the pension commission present an important opportunity to reassess and reinvigorate auto-enrolment. Reforming contribution levels and lowering the minimum age for eligibility are logical next steps.
“Encouraging savings habits earlier in working life gives younger employees a better shot at long-term financial security, but reforms must be carefully calibrated to reflect the financial realities many face today.”
Equally, any increase in contribution rates must be approached sensitively to avoid overburdening employers, particularly smaller firms grappling with rising employment costs and the impact of recent National Insurance changes, he said.
He added that a phased introduction may be necessary to allow businesses time to adapt.
“Auto-enrolment has come a long way, and with thoughtful reform, it can continue to evolve into a system that not only ensures coverage but delivers adequacy of savings.”
