It has been the biggest savings shake-up in a generation, and a very long time coming.

Way back in 2005 – in response to dire levels of retirement saving – the Pensions Commission recommended the launch of a workplace pension that would automatically set aside a proportion of workers’ salaries, topped up by both employer and government contributions, to help pay for life after work.

It has taken five years to get the full range of UK employers involved, from the global businesses employing thousands to the micro businesses with the weight of our economy on their shoulders.

The effect has been literally life-changing. Around nine million more people are now saving for old age. The number of pensioners living in poverty has dropped from 40 per cent in the 1980s to 14 per cent by 2015.

By the end of this decade, an extra £20bn will be set aside to pay for retirement thanks to the workplace pension.

The latest review of the scheme has now recommended changes to draw more of us into automatic retirement saving, such as lowing the age of enrolment to 18 and removing the lower earnings threshold.

But as the dust has settles over the initial rollout, experts are warning that the headline success figures don’t tell the real story.

Missed opportunities

Kate Smith, head of pensions at Aegon, warns that several important opportunities to make real differences to people’s old age have been missed.

“The Government has stopped short of making auto-enrolment the social norm for every single UK employee. Those earning less than £10,000 will still need to make an active decision about whether they wish to opt in to their workplace pension scheme and benefit from an employer contribution,” she says.

“Removing the earnings trigger altogether would have treated them like any other employee.”

The automatic right to an employer contribution stops as soon as an employee reaches State Pension Age, as they have to opt in. As many people are enjoying longer working lives, this is a missed opportunity to remove the upper age barrier, she believes.

Backing out

Meanwhile, if employees opt out of pension saving, or chose to pay a lower contribution than the statutory minimum, they lose the right to an employer contribution, effectively taking a pay cut.

“Opt-out rates don’t tell the full story,” Smith adds. “Cessation rates, where employees pay pension contributions then leave their scheme are almost double the 9 per cent opt-out rate at 16 per cent, peaking at one to three months after being auto-enrolled. Too many employees are building up micro pension pots.

“And the greatest omission of them all is a forward looking plan setting out higher auto-enrolment contribution rates. Despite plans to make more earnings pensionable 8 per cent, this still won’t be enough for most employees to build up an adequate retirement income.”

Elsewhere, there are still little more than promises to review the plight of self-employed workers, now accounting for 15 per cent of the entire British workforce, who have had no option but to watch lucrative savings incentives pass them by.

Falling through the gap

“There are some great ideas in this review, including starting pension saving at age 18 and making sure that every pound that you earn is pensionable. But the proposed pace of change is shockingly lethargic,” warns Steve Webb, former pensions minister and Director of Policy at Royal London.

“Talking about having reforms in place by the mid 2020s risks leaving a whole generation of workers behind.

"Those who never got to join a final salary pension and who have only recently come into pensions through automatic enrolment need urgent action to help them build up a decent pension pot. This pedestrian pace of reform risks creating a ‘lost generation’ of people in their late forties and fifties who will simply be unable to afford to retire.”

Then what?

“Arguably the biggest gap is what happens at retirement,” adds Stephen Lowe, group communications director of Just Group.

“As other countries such as Australia have discovered, you can put in place policies to get workers saving but you also need to encourage them to make good decisions about what to do with those savings.

“The DWP’s analysis considers ‘life journeys’ and the impact on pensions of events such as marriage or divorce, having children, suffering health problems or bereavement. It doesn’t include retirement, so is really only a ‘working life journey’.

“At some point that needs to be addressed, because there is mounting evidence that just because people have built up a pension, that doesn’t mean they know what to do with it.