Defying inertia: Employers’ role in boosting pension saving beyond the auto-enrolment default

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Automatic enrolment (AE) has helped millions more savers into workplace pensions – but many are saving at the minimum rate, which we know may be insufficient for the retirement people want. Our new report with the Institute for Employment Studies explores how employers use targeted measures like salary sacrifice, communication, and financial wellbeing support to help mid-to-low earners balance savings today with adequacy tomorrow.

Drawing on qualitative interviews with experts and employers across a range of sectors, the report outlines practical suggestions for employers and policy ideas for the Pension Commission to help close the adequacy gap.

Key findings

1. Inertia helps boost participation but keeps saving levels low

Interviewees consistently described AE as an important behavioural nudge, but many said it has unintentionally set the minimum rate as the default. Since AE relies heavily on inertia, most savers remain at default levels, even when these are unlikely to deliver adequate incomes in retirement. The challenge to balance immediate financial pressures and long-term saving needs is especially acute for mid‑to‑low earners, with some seeing pension contributions as unaffordable. Employers find it more difficult to engage staff who are experiencing financial hardship or instability.

2. Employers want to support pension saving but struggle to prioritise

There was a consistent call for the government to set out a clear, reasonable and phased timetable for any future changes so employers can plan and budget with confidence. Employers clearly recognise the undersaving problem and want to play a constructive role. However, they also highlight significant constraints and express varying views on how increased saving should be achieved. The existing 2017 AE review recommendations, the new Pensions Commission’s review that is underway, and increases to employer costs (notably National Insurance rises) have all added moving parts to what the right approach should look like.

3. Pension Commission has an opportunity to build consensus

The Pensions Commission’s review is an opportunity to bring together employers, workers, and industry to shape the next phase of AE. There is consensus about topics that need to be urgently addressed, including:

• Coverage of AE: Employers and experts highlighted ongoing gaps in who is brought into AE. Part‑time workers, those with multiple jobs, younger employees, and people with fluctuating hours continue to fall outside the system. While some employers proactively nudge entitled workers to join a pension, interviewees argued that expanding coverage, particularly through implementation of the 2017 Review recommendations, remains essential to improving long‑term outcomes.
• Minimum default level: Most interviewees agreed that current minimum contribution levels are insufficient for a financially secure retirement for many savers. However, there was concern about raising contribution rates too quickly, particularly during a period of economic pressure. Some employers are offering options to ‘opt-down’, i.e. by temporarily increasing the employer contribution to cover shortfalls from the employee to prevent opt-out during times of duress. They also highlighted the need to improve communication to help employees understand the long-term benefits of pension saving.
• Incentives to increase contribution: Many employers are already using measures such as salary sacrifice, or opt-down options, to complement employee contributions. Despite being positive about options like auto-escalation and sidecar savings, adoption rates and awareness remain low with complexity and administration cost frequently cited as barriers. Broader workplace financial wellbeing support is offered by some employers but not tied into pension engagement at workplace. There is room to discuss how the government could incentivise good employer practice, as well as employers’ role in supporting financial adequacy alongside individuals’ responsibilities.

4. There are practical actions employers can take today to support their workforce

These valuable steps can help mid-to-low earners, in particular, to save for the long-term, while meeting their financial wellbeing needs:

• Understand workforce needs: Regularly assess employees’ financial wellbeing – for example, through staff surveys or feedback tools – to identify pressures and tailor support.
• Support more contribution options: Offer choices to opt down or automatically increase contributions linked to career progression, coupled with proactive nudges for workers to join or rejoin pension schemes.
• Use timely, targeted communication: Engage employees during key moments, such as at pay reviews, promotions, or life events, to prompt them to review their pension and wider benefits.
• Simplify pension information: Use clear, jargon-free language and simple illustrations to help employees understand contribution options and long-term implications.
• Integrate pensions with wider financial wellbeing support: Align pension communications with financial wellbeing initiatives to help employees balance immediate financial needs with long-term planning.

AE was the defining policy success of the first Pensions Commission in the 2000s. With a new Pensions Commission, we now have a crucial opportunity to ensure it remains relevant and sustainable for the next generation, securing adequacy and fairness for future pension savers, while recognising the demands being faced by employers.

Read our full recommendations for policymakers and employers in the report.