Pensions have changed considerably over the last decade or so.
Auto-enrolment, launched in 2012, has been one of the biggest shake-ups, changing the concept of workplace pensions.
Some workers will now never have known anything different, but previously people could decide whether they wanted to join a workplace pension scheme or not, and not all employers offered the option.
This was contributing to a serious lack of pensions savings activity, which the government of the day wished to address.
The result was auto-enrolment – a ‘win-win’ solution, aimed at making workplace pensions affordable for employers and an attractive proposition for workers.
As the name implies, this meant automatically enrolling employees in a workplace-pension scheme, where unless they actively opted out, they were ‘in’.
Workplace pensions - a work in progress
So, what is the verdict on auto-enrolment, nearly eight years and more than 10m scheme members later?
“Automatic-enrolment has changed the workplace-pensions landscape completely,” says Maike Currie, director for workplace investing at Fidelity International:
“Many more workers now find themselves with retirement savings plans that their employer will be contributing to as well.”
She adds: “Automatic-enrolment has created millions of ‘investors’ in the UK, whether they realise it or not.”
But it has not been an unqualified success.
Kate Smith, head of pensions at Aegon points to some flaws in the scheme, with regard to qualifying criteria.
She says: “There are too many people missing out on auto-enrolment.
“This includes the under 22s and those earning less than £10,000 in a single job, the majority of whom are women
"In addition, the growing army of self-employed are excluded from auto-enrolment. These gaps need to be urgently addressed as these workers risk being left behind.”
Storing up problems in the long run
It does not mean that those who are in the scheme can sit back and relax, though.
While the amount of minimum contribution required has increased over the years (current figures are 5 per cent of salary from employees and 3 per cent from employers), there is no guarantee that people will be able to live comfortably on their auto-enrolled retirement savings.
Some may therefore be suffering from a false sense of security: “The reality is that, for most people, an 8 per cent contribution isn’t going to be enough to retire on, Ms. Smith warns.
“But, unfortunately many people may believe that it’s an adequate contribution as that’s the rate set by the government.”
This could lead to serious difficulties later on – not just for retirees, but for the credibility of the scheme itself, as Helen Morrissey, pensions specialist at Royal London points out: “The success of auto-enrolment will be undermined if people spend their entire working life contributing to a pension and then don’t get a decent income from it.