It looks like a spot of bad news for the Government’s big workplace pension reforms. Pension firm Scottish Widows carries out an annual survey about workplace pensions every year. This year’s survey has thrown up a statistic that will concern a lot policymakers and maybe even the pension minister Steve Webb.

The 2013 Scottish Widows Workplace Pensions Report has surveyed those who are waiting to be auto-enrolled into a company pension scheme and found that the amount the average employee plans to contribute has dropped by almost a quarter (24%) over the last year.

The report notes, more positively, that auto-enrolment has already seen over one million workers successfully enrolled in a workplace pension scheme through the new system which requires employees to actively decide not to join the scheme. The scheme has already been introduced for bigger employers and is now being rolled out across smaller employers and their workforces. But that is where the bad news comes.

The study of more than 5,000 people shows that among those who are still to be auto-enrolled – around 8.6 million people across the UK -  the amount they are willing to save each month has fallen in every salary bracket, bar the highest of £50,000 or more per annum.

In real terms, Widows says this amounts to a drop from £67 a month in 2012 to just £51 this year. Widows is worried about this because as it says: “the amounts are still above the minimum required contributions for automatic enrolment, they remain well below what is needed to match retirement aspirations”.

It continues: “Even among those workers already paying into a defined contribution workplace pension scheme, a significant shortfall exists between the monthly savings employees and their employers are making and their desired income in retirement.

“This shortfall between current savings and desired annual income in retirement indicates that despite the positive impact of auto-enrolment, employees are still removed from the reality of retirement.”

Widows has compiled the following table reflecting the gap between what people would in retirement and what they are likely to get.

Pension expectation gap amongst current Defined Contribution savers

Annual Salary

Employee:Average monthly contribution

Employer:Average monthly contribution

Average monthly savings outside pension

Total monthly savings

Projected annual pension income

Desired annual pension income

Monthly Shortfall

£10k – £30k








£31k – £50k








Above £50k
















The report notes that awareness of auto-enrolment has increased from 39% in 2012 to 65% this year, but adds there are still significant gaps in people’s knowledge – even among those who have already been auto-enrolled into their workplace pension scheme.

More than a quarter (28%) of those who have been auto-enrolled are unaware of how much they contribute and overall 44% of employees paying into their workplace pension scheme do not know how much their employer is contributing.

Worryingly, awareness remains particularly poor amongst those at whom the scheme is targeted, with one in five (21%) employees on an annual income of under £30,000 still not aware of the changes.

Lynn Graves, Head of Business Development, Corporate Pensions at Scottish Widows, commented: “We cannot ignore the fundamental correlation between poor employee awareness of the scheme and the lack of understanding of the realities of retirement. The alarming fall in the amount that employees are willing to contribute only serves to highlight this.”

A brief Mindful Money view – we have to wonder whether the issue about the amount of contributions is the pressing one at present. We have argued that auto-enrolment is just about the most important reform to pensions certainly for a couple of decades, but it may also be the most important single reform of the Coalition government. At present, the most important thing may be to get people into the habit of retirement saving and convince them not to opt out and then to make sure the message gets across that they need to contribute enough to get near their expectations. First we ought to convince most people not to opt out, thought it can’t hurt to focus employees’ minds on whether they should value say gym membership over a higher pension contribution. The Widows’ report certainly makes one thing clear – cut back on pension contributions and workers may discover one of the last guarantees in pensions – that if they don’t put enough in, then they will certainly not get what they want out.

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