The DWP has released its Workplace Pension Participation & Savings Trends report, revealing that over 88% of eligible employees (19.4 million) were participating in a workplace pension in 2020, a steady increase since 2012.
The gender pensions gap is narrowing across full-time and part-time employees, but Paul Leandro at Barnett Waddingham argues that the system needs to be reformed if we hope to solve the gap at retirement.
Paul Leandro, Partner at Barnett Waddingham, comments: “While more people are paying into a workplace pension, many are falling woefully short of paying enough. Auto-enrolment has played on inertia to get employees automatically saving into a workplace pension scheme, which has been pivotal in getting people saving earlier, for longer. However, minimum auto-enrolment contribution levels are too low, and if people don’t proactively change from their default contribution rates they could see a big shortfall at retirement and an inability to fund their desired lifestyles.
“In short, the pension system needs a drastic overhaul. It is still biased towards men and has not evolved with society, so for people outside the nuclear family especially – with one breadwinner, and no divorce – the system just doesn’t work. We need to introduce better tools such as higher default contribution rates, and better use of a wide range of investment assets. For people taking career breaks, such as women on maternity leave, there needs to be greater use of tools like auto-escalation of contributions when they return to help them plug any gaps in their pension. Ultimately, pensions need to viewed as more than just another savings pot – they can be people’s most valuable asset, and the most important safety net.”
