Pension contributions could increase – employers need to act now

HR leaders know that auto-enrolment contributions need to rise, but company budgets are already stretched thin. Steve Watson, Director of Policy and Research at Cushon, argues the answer starts with getting employees more engaged with their pension and paying in more.

I’ve been speaking at various events over the past couple of months, including the REBA Future of Pensions Summit, and the one question that keeps coming up is: “If pension contributions need to increase, what does that mean for employers?”

Businesses are feeling the pinch. They’ve been paying more in National Insurance contributions since April 2025 and National Insurance savings available through pension salary sacrifice are reducing from April 2029. For many businesses, increasing employer pension contributions across the board is simply not affordable.

But the need to save more for retirement isn’t going away. In May, the Pensions Commission’s interim report estimated that around 15 million people are under saving for retirement and warned that number could reach 19 million, without action.

The easy answer would be to ask employers to pay more but, for many companies, that simply isn’t an option right now. Nor can we just tell employees to save more. We need to look at this from a different angle: encouraging employees to make better-informed decisions.

That means a shift in focus for HR leaders, from just getting employees into a pension to finding ways to get them to take greater responsibility for their pensions saving and, crucially, to pay more money in.

Solving the inertia problem

Before 2012, pension participation was held back by apathy and the effort involved in joining a scheme. Auto-enrolment overcame that challenge by turning inertia on its head and making saving into a pension the default. And what a success story, with more than 11 million new people now saving into workplace pensions as a result.

But we now have a different kind of inertia. Plenty of people who were auto-enrolled years ago are still paying exactly what they were defaulted into. Not because they've decided it's enough, but because nothing has ever prompted them to ask.

And if someone doesn’t understand their pension – what it could be worth in retirement, or what a little extra could do – why would they change anything? This is where HR leaders can really step up. The challenge is no longer pension participation, it’s pension engagement.

Three ways to bring pensions into view

Cushon's Workplace Pension Report 2026 found that 96% of employers are confident their employees understand and value their pension. Yet 38% of employees have taken no action on it at all, and 11% have never even checked it.

That gap between employer confidence and employee behaviour is telling. We need to help employees understand their pension, see its value and feel motivated to increase their contributions.

There are three practical steps to start:

Show employees what they’re paying in. Many couldn’t tell you their contribution rate, let alone what it adds up to over a year. So start with the basics. Show employees what they contribute, how tax relief works and how much more they could build up by increasing their contribution. Make the information relevant to their salary and circumstances, rather than relying on generic messages about the importance of saving. The aim is to turn a percentage on a payslip into a meaningful decision about their future.
Make the employer contribution visible. Almost nine in ten employers (89%) told us they offer salary sacrifice, but only 41% of employees think their employer does. When people see and understand what their employer puts in, the pension feels less like a payslip deduction and more like a benefit.
Use the moments that already exist. A pay rise or promotion is the easiest time to increase contributions, because take-home pay still goes up. A gentle nudge to put some of that rise towards retirement costs the business nothing. Other opportunities include annual benefits reviews, pension statements and financial wellbeing communications. Rather than simply reminding people that they have a pension, use these moments to prompt a specific action: check your contribution rate, consider whether it is enough, or explore what increasing it by 1% could mean. The objective is to make increasing contributions a normal part of managing personal finances, rather than something employees put off indefinitely.

Better engagement is key

While we can’t expect employers to shoulder all the burden of pension adequacy by continually increasing their own costs, they can create a culture where people understand why retirement saving matters and feel equipped to act on it.

That, I think, is where the next phase of workplace pensions needs to go. Auto-enrolment got people into pensions. Now we need better engagement to help people get the most out of them.

Want to help your people see the bigger picture? Bringing old pension pots together is one of the simplest ways to show employees what they've really got, and whether it's enough. Find out how you can help them, and explore more of the research behind this article, by downloading The Employer Guide to Pension Consolidation.