I’m amazed that the news that we aren’t paying enough into our “pension” is a surprise. This report may have been a “labour of love” but it doesn’t “amaze”. The title of Pension UK’s report is

Closing the gaps: Can flexible contributions make retirement savings more affordable?

I know that the amount that companies with defined benefit pension schemes have put away well over twice the auto-enrolment minimum, most for many decades.I know the transfers members of DC plans have been substantial and have been most popular, right to the end of 2022.

It doesn’t seem to be surprising that with the amount of money that goes in, the amount coming out of a new workplace pension funded typically at 8% of a reduced band of earnings is not going to give as good a pension as one with twice the amount going in.

It is obvious that defined benefit schemes were offered by only a small proportion of the employers in this country .With the introduction of Auto Enrolment came a much more onerous obligation of employers who till then had made no contributions at all. This started low and increased over the period to 2018 to enable companies to adjust to the increased obligations of funding pensions.

Nicky Day promotes work by Jackie Wells sponsored by a number of workplace pension providers. It provides us with 8 slides that conclude that we aren’t saving enough and could do better. This is an extract which suggests that this report will be widely distributed. I suspect that is targeting the Pension Commission and that it is not so original as Pensions UK are making out.

The main things you need to know

The current system works

It is understood by savers and employers, but the minimum automatic enrolment contribution level is not enough to deliver an adequate retirement for many savers.

12% contributions are more achievable than perhaps was thought

Savers questioned were open to a 1% increase in their contribution, especially if it coincided with pay rises or was gradually introduced. Employers understand that contributions may need to rise, but ask that any increases should be phased in.

Simplicity is strongly preferred

Savers questioned tended to favour clear default contribution rates and were wary of flexibility, which they fear could undermine saving. Employers are concerned that more flexibility would add administrative burden and a greater risk of incorrect contributions.

Whatever is chosen would have impacts on the UK economy

Higher contribution rates could mean more long-term economic growth via investment as well as better adequacy, but would reduce short-term GDP and household spending.

The reality is that for the majority of people in workplace pensions, what they find  when they get to a point when they lose the capacity to work and earn as they used to do is that they have savings from their workplace pensions to fall back on.

But do they do not get a works pension as people who were lucky enough to be in a DB plan used to.

Actually, increasing the compulsory contributions into these savings plans  from 8% to 12% will help but not to get a pension. It will be seen by many as an increased tax by employers and employees. For this to happen, there will need to be clear advantage to doing so. It was and is clear to those in DB schemes that there is a wage in retirement resulting from their saving.

This is not the case from workplace savings schemes and until they win back the affection of those paying into them (workers and employers), there will be push back no matter what this report says , no matter what the Pension Commission reports.

The Government’s response has so far been to avoid demanding increased contributions, even though Government said it would by this time back in 2017. The pensions industry has lost the argument for more money to be paid to it and I would suggest it needs to do better our savings than it is doing now.

Why do employers and employees not pay more for pensions?

The answer is that the pensions industry has failed to convince Governments to enforce higher contributions and they’ve failed to encourage the vase majority of employers to pay more money in either through increased employer’s or employee’s spare cash.

This report it is someone else’s fault. But it is not. It is the fault of not providing popular product. Since 2012- when RDR ended the incentive of advisers to sell product that paid commission, those outside AE have stopped paying. The self-employed have stopped paying into “pensions” because they see better ways to go about providing for retirement.

When I was young, a pension was something that people aspired to having. A job was a good job if it came with a pension and we all knew what a pension was, it was a wage in retirement. People were and are amazed by workplace pensions that pay them month after month sometimes for 30 years or more.

We have lost that connect and though a much higher proportion of us are now saving into plans, we no longer feel that way about our pot. Most of us are terrified by a pot that they don’t know what to do with.

This Government has started out its work by requiring pensions to be available in return for the savings being done. Those pensions may be DB, DC or CDC but they will all in future have a regular income as the default outcome. A regular income (albeit a level one for DC – increasing for other pensions (most of all the state pension)  will be displayed on dashboards.

This will mean that people who thought they were doing alright will discover that they may not be and may voluntarily increase their contributions, they may put pressure on their employer to do the same and either way they will demand better from their providers.

Providers of workplace pensions are not yet “amazing” us enough to make us save some more.