Auto-enrolment is a staple of workplaces in the UK. Over 10 million employees have been auto-enrolled into a workplace pension scheme, building nest-eggs by making personal pension contributions, as well as benefiting from employer contributions.1

By removing the need to make an active choice to start saving, auto-enrolment harnesses the power of inertia – or ‘going with the flow’. There are positives to this – more employees are saving in a pension than before. And fewer employees have opted-out of their workplace pensions than originally expected when auto-enrolment was introduced in 2012. But the downside of inertia could leave your employees falling short of a comfortable retirement income.

Here are our key findings on the impact of inertia and what this means for you and your employees.

3 effects of inertia on your employees’ saving habits

Our research, in partnership with the University of Edinburgh, explores the impact of auto-enrolment on saving psychology, with a representative sample of 2,000 UK adults. While the results show a somewhat positive attitude towards pensions and saving, there are signs that inertia could be holding back some of your employees from saving enough.

Unless otherwise stated, the facts and figures referred to are taken from this research, which was conducted between June to September 2022.

1. Employees are engaging less with their savings

48% percent are less inclined to take any action on their workplace pension because it’s done for them. This rises to 52% in 18-35-year-olds. Many believe that the default auto-enrolment contribution rate (8% of qualifying earnings) is sufficient for retirement. This has kept voluntary contributions beyond the default amount to a minimum.

The reality is that for most people, minimum contributions are unlikely to be enough for a comfortable retirement lifestyle. The Pensions and Lifetime Savings Association (PLSA) say that 62% of households currently saving into a defined contribution pension will not achieve their retirement income target.2 In their recommendations for pension reform, the PLSA also say that increasing minimum auto-enrolment contributions is ‘the single most effective reform to get more people on the right track’.2 So, if your employees aren’t taking an active interest in their savings, they could be falling behind.

2. Over half don’t know how much they’re saving

52% feel confident they’ll have saved enough for retirement. Yet 56% have only a rough idea – or no idea at all – of how much they pay into their workplace pension. This suggests the potential for misplaced confidence if employees are simply assuming that they’re saving enough.

Employees may find it harder to create solid financial plans without a clear idea of how much they’re saving. This could hinder their progress towards both long and short-term goals and have a negative impact on their financial wellbeing. Find out more about supporting your employees with financial wellbeing in our Financial wellbeing index summary.

3. Your employees might delay thinking about the future

The majority of employees do see auto-enrolment as a positive thing. 56% say they take a more active role in considering their future and whether they’re saving enough as a result of being auto-enrolled. And yet, for those who are following the status quo, it could delay them from thinking ahead if they believe their pension is already taken care of.

The longer your employees wait to act on saving for the future, the less time their pension pots and other savings have to potentially grow. The later they start, the more money they might have to save each month to achieve a comfortable retirement income.

What needs to happen to improve pension engagement?

Awareness and understanding of pensions remain low and the effects of inertia has likely contributed to this. There are steps being taken by the government and pensions industry to try and tackle the problem:

  • The recently launched three-year Pension Attention campaign is the largest industry effort to date, aiming to increase interest and help connect people to their pensions. I’d encourage you to signpost this resource to your employees.
  • Pension Dashboards – a government initiative expected to go live to the public later in 2024 – will provide a way for employees to see information about all their pensions securely in one place online.

While these are positive steps, they might not be enough to tackle the problem of pension engagement and encourage greater saving. From our research, our academic partners proposed a list of recommendations that you could consider implementing to empower employees to increase their short and long-term savings:

  1. Annual nudges to encourage your employees to engage with their pension and make active decisions relating to it. For example reviewing their contributions, checking if they’re on track for their retirement goals, or nominating a beneficiary.
  2. Remind employees of their pension contributions as part of annual salary reviews to nudge employees to consider raising their pension contributions (if appropriate with their personal circumstances) when they receive salary increases.
  3. Consider introducing matching employer contribution schemes or save more tomorrow initiatives, to encourage employees to regularly review and increase their pension contributions as they progress through their career.
  4. Introduce wider workplace savings, such as ISAs, into the workplace to increase employees’ financial resilience and flexibility in how they save and when they access their benefits.

You can read the full list of recommendations for employers, providers, government and policy from page 34 in our academic whitepaper A decade of auto-enrolment.

Don’t let your employees sleepwalk into retirement

You can play a valuable role in preventing your employees from sleepwalking towards a future without sufficient savings. While inertia won’t affect all your employees, around half are likely to have fallen into the ‘going with the flow’ trap.

It’s an ongoing challenge, and one that requires cooperation from the government, providers like us and employers to overcome.

For a deeper dive into our auto-enrolment research and recommendations for engaging your employees with their pensions, take a look at our digital flipbook.

  1. Unless otherwise stated, the facts and figures referred to in this article are based on research conducted by Aegon in partnership with The University of Edinburgh. A Decade of Automatic Enrolment Has it helped or hindered saving psychology?, research conducted between June to September 2022, representative sample of 2,000 UK adults.
  2. Automatic enrolment declaration of compliance report. Data source, The Pensions Regulator. Accessed February 2023.
  3. Five steps to better pensions: time for a new consensus. P4 and P11, section 22. Data source, Pensions and Lifetime Savings Association, 2022.



Regulatory and industry Insights