Auto-enrolment closed the gap but more needs to be done, says pension minister
The introduction of auto-enrolment in 2012 helped boost pension savings, but more needs to be done to encourage people to save for retirement, a leading government official has said.
Speaking at the Association of British Insurers conference, pensions minister Torsten Bell acknowledged the importance of auto enrolment, with savings rates for eligible workplace employees doubling since 2012.
Pension assets have also grown, with defined benefit schemes holding £1.4 trillion, which most people are exposed to, while defined contribution schemes are expected to hold £900bn by 2030.
But despite the success of auto enrolment, many workers are still falling through the cracks, leaving them at greater risk of running out of pension funds early into retirement.
Just one in five self-employed workers in the UK save into a pension, while overall only 55 per cent of working age people actively save for retirement.
Bell said: “That’s not great, and so we need to start thinking about what else we need to do.
“It’s not just on the industry saying we think this should happen, there’s a whole host of areas where it’s on the government to facilitate that happening at all.”
Fixing pension saving
Bell noted that the government has doubled down on increasing pension saving among workers in the UK, including acknowledging the fact the pensions industry needs to be “made up from bigger and better action schemes”, with consolidation already underway in the DC market.
Under the Pensions Scheme Bill, which is expected to be passed into law in mid-2026, multi-employer DC schemes must manage at least £25bn in assets by 2030 or be on track to get there by 2035.
Schemes which are unable to reach this target will be forced to consolidate, with the government keeping its focus on larger schemes which are able to invest at scale, including in assets which offer higher long-term returns including private equity and infrastructure.
The government also revived the pensions commission last summer to look into pension adequacy and why workers are on track to be poorer than today’s pensioners, with findings set to be released in an interim report in spring 2026 before the full report in 2027.
Long term investment
While Bell voiced the need for pension reform to increase investment, he also acknowledged the government’s part to play in boosting capital placed in the economy.
Productivity stagnation since 2008, which has caused investment into the UK to become one of the lowest in the G7, has led to workers being £14,000 worse off per year and a lack of projects which drive economic growth.
He noted that there are multiple causes for low productivity growth including “austerity, Brexit and covid” which contributed to the drop in real world earnings, and confirmed the government’s intention to reverse this, including through greenlighting infrastructure projects.
This includes fast tracking nine new reservoirs, with none built between 1992 and 2024 despite the population growing by 10m, as well as preventing councils from blocking housing being built near stations.
Overall, the government has committed an extra £120bn in public investment over the course of this Parliament, the highest levels seen since the 1970s.
Bell said hiking levels of investment in the UK is the focus of Labour’s “growth strategy over the course of the next few years.”
But, while the pensions minister acknowledged more needed to be done including challenges facing UK employment levels, he also argued that “the gloom” towards the UK “is overdone”.
He said: “This economy is fundamentally one that is well suited to where the growth markets are.”