Adequacy: the all-important question

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How do you measure success when it comes to pension reform? In the UK, it is clear that the government measures the success of auto-enrolment by some numbers, but not others. 

Occupational pension scheme membership exceeded 45.6m in 2018, a new record, according to data published by the Office for National Statistics (ONS) in June. Pensions minister Guy Opperman claimed credit for the ruling Conservative party.

“These figures show, once again, just how successful the government’s pension reforms have been,” he said last month – ignoring that auto-enrolment was introduced by the last Labour government and rolled out under the Conservative-Liberal Democrat coalition. 

Opperman also claimed that the ONS’ data “tell a story of millions of people now building a pension pot for their future and looking forward to a better retirement”.

But does it? ONS figures showed that contributions to DC schemes were just 5.1% on a weighted average basis last year, compared to 25.6% for DB schemes. Prior to auto-enrolment, the average DC contribution was 11% of salary, according to consultancy firm Buck. 

These numbers could imply that employers have taken the opportunity presented by auto-enrolment to pay the minimum required by law. This was predicted by experts years ago when auto-enrolment legislation was first drafted.

Millions of UK savers may well be looking to a better retirement, but they will not get one unless policymakers acknowledge that getting people through the door is just the first step. Those designing and overseeing auto-enrolment systems elsewhere in Europe should take heed.

Nick Reeve,
News Editor

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