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People need more help with their pensions, warn experts

28 September 2023

Auto-enrolment has not gone far enough and most advice is based on out-dated ideas.

By Matteo Anelli,

Reporter, Trustnet

The UK has a growing issue when it comes to pension saving, with recent studies exposing a national pension emergency, according to interactive investor’s Show Me My Money report.

Experts have questioned the effectiveness of auto-enrolment schemes into workplace pensions following data on how a vast number of people across generations are not aware of how much they have saved in their pensions, how much they pay in fees and whether their pension is being de-risked when retirement is approaching.

For James Daley, managing director of consumer group Fairer Finance, it’s clear that the gap in pensions wealth is widening.

“Although auto-enrolment has ensured that more people are saving into a pension, it’s also had the unintended side effect of creating a less engaged generation of pension savers. It may be time for the government to admit that auto-enrolment has not gone far enough,” he said.

“We need more advice and support in the workplace so that younger generations are engaged with their pensions, and have a plan about how they’re going to meet their retirement goals.”

Alice Guy, head of pensions and savings at interactive investor, called on the government “to look again at minimum auto-enrolment rates and increase minimum contribution rates to 12% to give people a better chance of reaching a good standard of living in retirement.”

But the issues continue even after the savings stage, as James Corcoran, senior chartered financial adviser at Lumin Wealth, told Trustnet.

“I've had a few clients coming to see me at 63 and they'll say ‘My ISA has done pretty well but my pension’s been rubbish for three years, I don't understand it’. And that’s because of life-styling,” he said.

That’s when, as you're approaching retirement date, your portfolio is de-risked over time. The problem, according to Corcoran, is that life-styling is based on an old understanding of retirement.

“The regulatory requirement is to provide illustrations which are based on a really outmoded idea that at a specific retirement date everyone is getting the pipe and slippers out and from their £400,000 pension pot they take £100,000 tax-free cash and £300,000 is traded for income for life. But that just doesn't happen now,” he said.

“It's far more likely that someone has a blended retirement where they might go part-time in their 60s or they might change careers or go self-employed.”


The key, according to Corcoran, is always to understand what you need, for example by either going to a financial advisor or using cashflow modelling. The former solution isn’t always for everyone because of the fee aspect, which can generates an advice gap.

“If you've got £40,000 in a pension and you're 29, is a financial advisor going to take you on? Many advisors charge on a percentage base, although an increasing number now also offer hourly rate charging, which is good under Consumer Duty as well,” he said.

“But sometimes it may well be just a phone call to put someone on the right path, or sometimes a one-off session with cashflow modelling will do”.

Cashflow modelling is the key “that underpins everything”, said Corcoran.

When people try to calculate how much you will need in retirement so that they know what to work towards, a spreadsheet isn’t accurate enough.

“Cashflow modelling is the best way possible that you'll ever be able to understand your needs. It allows you to factor in things such as receiving inheritance or having to fund children through university, etcetera, and if you work out that you need £500,000, then it’s just about understanding how to get there,” he said.

“As an industry we're very keen to talk about risk, capacity for loss and volatility. Having a high-risk portfolio might instantly sound concerning, but it’s actually more about understanding what it means and how different levels of risk can serve you, rather than just looking at the terminology, because when you look at the growth difference between low, medium and high risk over more than 20 years, it typically makes a massive difference.”

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