In a recent survey by fintech firm iPipeline, over 80% of financial advisers expressed support for changes to the UK’s auto-enrolment pension system. Many called for a lower minimum age and higher contributions, aiming to bring more people into the fold. Some called for dropping the Lower Earnings Limit deduction and the trigger point to give lower earners a bigger incentive to join the scheme. On the surface, this seems like a noble cause—getting more individuals to save for their future. But in the midst of a cost-of-living crisis, particularly affecting the most vulnerable, this raises important questions: Who benefits from these changes? And at what cost to those they claim to help?
What Advisers Are Asking For
The survey revealed that over half of advisers want both a reduction in the minimum age for auto-enrolment to 18 and an increase in minimum contributions. These advisers argue that universal pension access and increased contributions will help individuals build financial security over time.
However, this perspective misses a critical consideration. For lower earners and young workers—groups already under financial strain—redirecting a portion of their limited income into pensions may lead to immediate hardships. And , lack of access to a working life of savings. Worse, it might result in little to no long-term benefit if those savings merely offset means-tested benefits in retirement.
A Question of Priorities
Let’s address the elephant in the room: Why are advisers so eager to see these changes implemented?
Could it be a genuine belief in the transformative power of financial capital? Perhaps some advisers see pensions as the cornerstone of financial wellbeing, prioritising future savings over present needs. But we must also acknowledge a less altruistic possibility—that these younger, lower-earning savers represent potential investment clients of the future, feeding a system that thrives on accumulating assets under management.
This isn’t to vilify advisers; many are undoubtedly motivated by good intentions. But intentions aren’t enough. We must scrutinise whether these changes serve the best interests of the people they aim to protect or simply perpetuate a system that prioritises financial capital above all else.
Who Does Auto-Enrolment Really Serve?
For those 50 years away from retirement, the benefits of pension savings are far from guaranteed, especially for low earners. Contributions made today could deprive them of the disposable income needed to navigate the cost-of-living crisis. Worse, these savings might have minimal impact on their future quality of life if means-tested benefits in retirement reduce or negate the value of their pension pots.
In contrast, financial services providers and employers offering workplace pensions often stand to gain from an expanded auto-enrolment system. Advisers too may see this as an opportunity to grow their client base, ensuring a steady stream of individuals investing in pension products. But is this the best path forward for society as a whole?
A Call for Balance
The debate around auto-enrolment must strike a balance between encouraging long-term savings and addressing immediate needs. While building a pension pot is important, it should not come at the expense of an individual’s present wellbeing. A more inclusive system—one that considers the unique challenges faced by young workers and low earners—could be the answer.
Here’s what we could focus on instead:
- Flexibility in Contributions: Allow individuals to adjust their contributions based on their current financial circumstances. This would prevent undue hardship while still fostering a savings culture. Flexibility ensures that saving for the future doesn’t come at the expense of meeting today’s essential needs.
- Financial Education: Equip young people and low earners with the knowledge to make informed decisions about their financial futures. Instead of mandating savings that may not suit their unique circumstances, we can empower them to build confidence and clarity around managing money.
- A Holistic View of Wealth: Move beyond the narrow focus on pensions to consider other forms of wealth-building, such as skills development, social capital, and emotional resilience. True wealth encompasses more than financial savings; it’s about creating stability, fulfilment, and opportunities for growth in all aspects of life.
By broadening our perspective and offering tailored, inclusive solutions, we can create a financial system that truly works for everyone. This approach prioritises people’s immediate needs while also laying the groundwork for long-term wellbeing, ensuring that every individual has the tools to thrive.
Building a Fairer System
At the Academy of Life Planning, we advocate for a financial system that empowers individuals without exploiting their vulnerabilities. Auto-enrolment, while a step in the right direction, must evolve to reflect the diverse needs of all savers. Let’s shift the focus from “more contributions” to better outcomes—not just for pension providers and advisers but for the people who depend on these policies to secure their future.
Expanding auto-enrolment should be about inclusion, fairness, and sustainable financial wellbeing. If we can achieve that, we’ll have a pension system that works for everyone, not just the fortunate few.
What do you think? Join the conversation and help shape a more equitable financial future for all.
Academy of Life Planning 