Speaking at the Association of British Insurers conference, pensions minister Torsten Bell highlighted the significant impact of auto-enrolment since its introduction in 2012, while emphasising that further reforms are essential to enhance retirement savings across the UK.
The Success and Shortcomings of Auto-Enrolment
Bell noted that auto-enrolment has successfully doubled the savings rates for eligible workplace employees over the past decade. Pension assets have seen substantial growth, with defined benefit schemes currently holding approximately £1.4 trillion, and defined contribution schemes projected to reach £900 billion by 2030.
However, despite these achievements, significant gaps remain in pension coverage. Only around 55 per cent of working-age people actively save for retirement, and just one in five self-employed workers contribute to a pension. This leaves many individuals at risk of depleting their pension funds early in retirement.
Addressing the Savings Gap
Bell stated, “That’s not great, and so we need to start thinking about what else we need to do.” He emphasised that the responsibility extends beyond the industry, with the government playing a crucial role in facilitating necessary changes.
The government is intensifying efforts to increase pension saving, including promoting consolidation in the defined contribution market. Under the forthcoming Pensions Scheme Bill, expected to become law in mid-2026, multi-employer DC schemes must manage at least £25 billion in assets by 2030 or demonstrate a clear path to achieving this target by 2035.
Schemes failing to meet these requirements will be required to consolidate, with a focus on larger schemes capable of investing at scale in higher-return assets such as private equity and infrastructure.
Reviving the Pensions Commission
In a move to address pension adequacy, the government revived the pensions commission last summer. This body is investigating why current workers are on track to be poorer than today’s pensioners. An interim report is scheduled for release in spring 2026, with a full report to follow in 2027.
Boosting Long-Term Investment
Bell also discussed the need for pension reform to increase investment in the UK economy. He pointed to productivity stagnation since 2008, which has resulted in the UK having one of the lowest investment levels in the G7. This has led to workers being approximately £14,000 worse off annually and a shortage of projects driving economic growth.
He identified multiple factors contributing to low productivity growth, including austerity measures, Brexit, and the COVID-19 pandemic, all of which have impacted real-world earnings. The government aims to reverse this trend by greenlighting infrastructure projects, such as fast-tracking nine new reservoirs—none of which were built between 1992 and 2024 despite a population increase of 10 million—and preventing councils from blocking housing developments near stations.
Overall, the government has committed an additional £120 billion in public investment during this Parliament, marking the highest levels since the 1970s. Bell described increasing investment as a central focus of Labour’s growth strategy for the coming years.
A Balanced Outlook
While acknowledging the challenges, including issues with UK employment levels, Bell argued that the prevailing pessimism about the UK economy is overstated. He remarked, “This economy is fundamentally one that is well suited to where the growth markets are.”
In summary, while auto-enrolment has laid a strong foundation for pension savings, Bell’s address underscores the urgent need for continued reform and investment to ensure broader financial security for retirees and stimulate economic growth.
