/ Money

Do you trust your employer to pick a good pension?

In October this year one of the biggest shake-ups to the pension system for decades will begin. But are we ready for it? And how can we encourage people to put aside more for their future?

Acknowledging that the state pension is too low to sustain most people in a comfortable retirement, the government has adopted a policy of ‘auto-enrolment’, where employees who don’t already belong to a workplace scheme will be automatically signed up to one.

In a country where only half the workforce currently belongs to a pension scheme, this has the potential to transform the pension landscape and deliver a better standard of living in old age.

What is auto-enrolment?

A new report from Scottish Widows suggests that, at the moment, more than half of employees are unaware of changes to workplace pensions. So what is changing?

Starting with large firms first, then taking in medium and small employers, everyone over the age of 22 earning more than £8,105 a year will eventually be signed up. If their employer doesn’t have a suitable scheme they can join the newly formed National Employment Savings Trust (NEST).

Employers and employees are both required to make a minimum contribution, which will initially be 1% from the employer, 1% from the employee with a further top up coming from HMRC in the form of tax relief. When automatic enrolment is fully implemented in 2018, the total contribution should come to at least 8% (3% employer, 4% employee and 1% HMRC).

Even this might not be enough to guarantee a comfortable retirement. Newly enrolled staff will be saving into a defined contribution scheme, building up a pension pot with which to buy an annuity. At the moment, it takes £100,000 to guarantee £6,000 a year.

Starting young is clearly a good idea, but topping up with extra contributions would also help (if you can afford it). Enlightened employers already contribute more than the minimum, helping their workforce to put money aside for a meaningful pension. More need to do the same.

Getting workplace pensions right

Low-cost schemes like NEST and a sense of pension ownership should help those who are auto-enrolled stay the course. The risk is that too many simply decide that saving isn’t worthwhile and ‘opt out’. This is the challenge we face. Automatic enrolment should be good news for millions of people, but companies must select good-value schemes to ensure that it delivers for their staff.

What do you think about auto-enrolment pensions? What would make you opt out and what would convince you to stay in? Do you trust your employer to select a good value pension scheme, or is NEST the only worthwhile option?


1) I’m sure many companies will be looking to get the cheapest deal they can for themselves rather than what’s best for their staff.
2) With the BoE repeatedly turning to QE , is there any point in saving for a pension.


Well as a retired public servant I can only say the pension I received was adequate – The problem is the private sector is jealous.


Well, Richard, perhaps the private sector is jealous because they are forced to pay your adequate pension.


I didn’t trust Robert Maxwell and he turned out to be a pension thief. I’m sure there are more corporate pension thieves out there. That is one reason why I haven’t given my money to a pension scheme.

I hope ‘Which’ and lots of other organisations are trying to ensure the new pensions are safe from corporate greed.


I’m 59 and have paid into a pension since I was 21. I am now forced through illness to take my pension
as the state say I’m not ill enough to receive any benefit.I must say that if I’d known how little you receive after paying for 38 years I would not have bothered. And the fact that if you receive a pension or save for retirement you can’t claim for anything.


This is just a scam to put money into the hands of the politicians’ friends in the insurance companies.
You will pay in for years and when you are old find it’s worth nothing, and you will have to go through the rigmarole of making a very complicated and drawn out insurance claim.


One thing your article doesn’t cover is what fees will be on these pensions that people will be enrolled into.
From a personal point of view I would have rather seen the govt concentrate on tidying up fees/ making them more transparent first.

Since I was made redundant (2 years ago now), my stakeholder pensions is only going down due to the fees I’m still having to pay even though I’m not paying money into it. Surely as there’s less admin for the company to do, shouldn’t I be entitled to a reduced fee?

By the time I get to retire its going to be almost worthless, rather wished I hadn’t wasted all that money saving, when I could have paid for double glazing, a new tv etc etc


Let’s be frank; unless you have a fabulous public sector pension funded by the taxpayer the best course of action is to spend all your money now whilst it is worth something and then live on state benefits. Whatever you save now will be worth nothing come retirement and the insurance companies will take their generous cut too, reducing it further.

Chris B says:
5 October 2012

I agree – saving into pensions has a big credibility problem: a history of employers investing badly, under-investing or indulging in outright criminality; opaque products that are an outright swindle, or anyway benefit the financial industry more than the investor. Its hardly easy to invest with confidence…..

But David L’s solution ” spend all your money now whilst it is worth something and then live on state benefits” is risky too. It assumes that there is money left in the future for state benefits, and popular will to keep paying them. Easy to imagine a less generous future where those who did save (or are of working age and struggling to save now) don’t vote to bail out those who could have saved but didn’t.