Employers back higher auto-enrolment contributions but call for flexibility

Polling of 500 business leaders found that 43% think contributions should be increased, compared with 36% who believe they should remain at current levels. Only 6% favour lowering contributions, while 8% believe rates should be removed entirely and left to individual employers.

Support for higher contributions was strongest among larger organisations. More than half (54%) of employers with over 250 staff back an increase, alongside half (50%) of companies with 50 to 249 employees.

“As the Pensions Commission considers the future of the system, we have a crucial opportunity to ensure it remains fit for future generations while giving employers certainty.”

Catherine Foot, Standard Life Centre for the Future of Retirement

The findings come as policymakers debate how to address concerns about retirement adequacy. While auto-enrolment has brought more than 22 million people into workplace pensions, government estimates suggest over 15 million working-age people are still heading for an inadequate retirement income.

A key theme from the research is that employers want to support stronger pension saving but remain cautious about cost pressures. Among those considering raising contributions in the next five years, 37% say their motivation is improving employee wellbeing and long-term financial security, while the same proportion believe employers have a responsibility to help workers save more for retirement. Around a third (34%) say stronger pension provision could help attract and retain staff.

Phased approach needed

Employers also indicated that any changes would need to be introduced gradually. Almost three-quarters (73%) support a phased timetable for raising contribution levels, while 72% favour mechanisms that would allow employers to pause or slow increases during economic downturns.

Catherine Foot, director of the Standard Life Centre for the Future of Retirement, said minimum contributions currently risk creating a false sense of security among savers.

She explained: “The success of auto-enrolment is to be celebrated, but it’s clear more needs to be done to support low-to-middle earners, in particular.

“If changes are to be introduced, we need to ensure broad support. It’s also crucial that employers have time to prepare with a clear roadmap for change – this is about evolution, not revolution, to improve pensions adequacy.

“As the Pensions Commission considers the future of the system, we have a crucial opportunity to ensure it remains fit for future generations while giving employers certainty.”

The research also suggests employers may be open to alternative ways of boosting savings. Three fifths (61%) say they would consider introducing auto-escalation, while 59% would consider payroll-linked ISAs and 49% sidecar savings.

However, interviews with employers found that awareness and adoption of these approaches remained relatively low due to complexity and cost concerns.