By Steven Cameron

Some years, like this one, are more memorable than others. Thinking back 10 years to 2012, there were several notable events, including the Olympics in London and celebrating the Queen’s Diamond Jubilee. It was also a very significant year for pensions, when the UK Government launched its flagship pension initiative,

auto-enrolment. To date, this has seen

10.6 million employees across the UK automatically enrolled into a workplace pension.

Auto-enrolment turned the tide on the number saving for retirement. Prior to its launch, there had been a gradual decline in those with private sector pensions, and a growing and worrying dependency on the state pension to support individuals in later life.

Through auto-enrolment, employers must provide eligible employees with a workplace pension. All UK employees aged between 22 and state pension age, who are earning more than £10,000 in a single job are entitled to a minimum contribution of 8 per cent of earnings between £6,240 and £50,270 a year. Employers must pay at least 3% of this, with employees paying the balance, although the Government helps here with a “tax relief” top-up. Both employers and employees can choose to contribute more if

they choose.

The huge rise in the number of people now saving into a workplace pension, compared to just over a decade ago, is a clear marker of success. This includes many younger workers as well as lower earners, which includes a disproportionately high number of women.

But at Aegon, we wanted to delve deeper. Working with the University of Edinburgh Business School, we explored how auto-enrolment has affected attitudes to saving and money

and how consciously or actively people who

have been auto-enrolled think ahead to plan

for later life.

For some, auto-enrolment is helping people adopt good savings habits, to put something away every month, making financial provision for their future. But others assume they are doing enough by being automatically enrolled, with 45% saying they pay less attention to their pension savings and 48% less inclined to take any action in relation to their long-term savings.

This is worrying because the minimum 8% contribution will not, for most people, provide enough on top of the state pension to provide a reasonable income in retirement. With many

not realising this, it’s not surprising voluntary top-ups have not been widespread.

This is where there’s a major challenge.

Auto-enrolment works on the basis of “inertia”

– you’re “in’ unless you take an active decision

to opt out. Most individuals “go with the flow”, creating high participation rates, with workplace pensions now “the norm”. Positively, the number of people who decide to “opt out” within a month of being auto-enrolled has been lower than expected at around one in 10 people.

But inertia is a double-edged sword and we have found it’s holding back further voluntary saving. Having made no active decision to join, many individuals are less likely to “engage” with their pension when it comes to things like increasing contributions or choosing where to invest their pension funds.

I hope over the next 10 years, auto-enrolment can build on its successes, but that we can also learn from its weaknesses. At some stage, we need to move from inertia to engagement, expanding pension participation and helping people decide how much they should be saving to have the retirement they aspire to.

There are groups of individuals who are currently excluded including those under age 22 or in lower paying or part-time jobs, which leave them earning under £10,000 in any particular job. The self-employed are also not benefiting from auto-enrolment. I would like the UK Government to focus on helping these excluded groups to making auto-enrolment even better.

Furthermore, government, industry and employers need to help individuals understand more about their pensions and their retirement needs. This might include more personalised and targeted communication and greater use of free guidance and regulated advice. All of this could empower individuals to make more active decisions about their financial futures.

Of course, the current cost-of-living crisis means many are struggling to get by today, let alone saving for the future. Some pension savers may struggle to continue current contribution levels but if an employee stops, it’s likely the employer contribution will stop too, meaning losing out twice over. If you really have no other option, it’s worth asking your employer if they will voluntarily continue their contributions

for a period.

But in today’s tough times, our research shows that as a result of auto-enrolment, 78% of those with a workplace pension say this makes them feel better protected and more resilient to later life events.

These challenges come on top of events of

the past couple of weeks that have thrown a financial curve-ball for many and you may find that your own financial position has been affected. It is worth considering seeking help from a professional financial adviser or from

the Money and Pensions Service, which offers free guidance.

Steven Cameron is pensions director at Aegon.