Could DC-only savers be employers’ next people risk?

With a Commission focused on adequacy and a Bill focused on improving outcomes, defined contribution adequacy is increasingly part of good workforce governance.

For years, many employers treated pensions as a set-and-forget compliance item: auto-enrol, pay the minimum, run a comms campaign in September. That stance is becoming harder to defend.

Two forces are colliding:

Policy direction is explicitly about outcomes. The Pension Schemes Bill’s reforms are designed to improve value for money, transparency and the overall quality of DC outcomes for savers.
Adequacy is now on the public record. DWP (Department for Work & Pensions) analysis indicates 43% of working age people (22 to state pensions age (SPA) are under saving when assessed against target replacement rates, even after the success of auto enrolment.

At the same time, the Government has revived The Pensions Commission, specifically to look at adequacy, fairness and sustainability. In other words, the system is moving from “did you comply?” to “did your people get a fair shot at an adequate retirement?”

The impact (how DC-only becomes a people risk)

DC only saving shifts almost all retirement risk to the individual investment risk, inflation risk, longevity risk and decision risk at retirement. That’s manageable for financially resilient employees; it’s far tougher for lower earners, those with career breaks, renters, and people with fragmented working patterns.

What this creates for employers is a modern people risk profile:

Retention and reward competitiveness: employees compare total reward; inadequate employer funding looks increasingly out of step with market expectations (especially where competitors are lifting contributions or offering matching).
Workforce planning risk: more employees delaying retirement because “the numbers don’t work,” creating progression bottlenecks and higher late career health and absence costs.
Financial wellbeing and productivity drag: money worries spill into presenteeism, employee assistance program (EAP) usage and distraction, pensions aren’t separate from financial wellbeing.
Reputational risk: policy, media and employee sentiment increasingly frame “minimum automatic enrolment (AE)” as the floor, not the benchmark for good practice. This is signalling that outcomes matter.

The solution (how employers reduce DC adequacy risk without promising the impossible). Think of this as a three levers approach: funding, design, and behaviour.

1 Funding: make it easier to save more

Move from “minimum” to “matched progression.” If cost is a concern, consider step ups tied to tenure, pay review, or promotion (e.g., +1% employee with +1% employer match up to a cap).
Use salary exchange (where appropriate) to share NI savings. This can increase total contributions at a similar net cost for many employees position it as “unlocking savings,” not “pension complexity.”
Target enhancements where risk is highest. For example: enhanced employer contributions for lower to middle earners (where adequacy gaps bite hardest), or for returners after parental leave.

2 Scheme design & governance: treat the default like your biggest asset pool (because it is)

Run an outcomes led provider and default review (net of fees, risk/return, ESG where relevant, service, retirement options). The Bill is pushing the market in this direction anyway.
Make small pot friction visible. Multiple small pots and disengagement are a known system inefficiency; the Bill is seeking to address consolidation.
Plan for decumulation support. As policy evolves toward stronger at retirement pathways (“guided retirement” is already being discussed in industry commentary), employers should prepare for questions about drawdown, annuities, cash and support models.

3 Behaviour and engagement: shift from awareness to action

Use “personalised moments,” not annual campaigns. Onboarding, pay rise, bonus, life events, return from leave these are decision windows.
Segment messaging by life stage (but keep it simple): start, build, catch up, prepare.
Give people a next best action. Not “pensions are important,” but “increase by 1% today,” “nominate a beneficiary,” “combine pots,” “check contribution basis.”

Adequacy isn’t purely an employee issue anymore. With a Commission focused on adequacy and a Bill focused on improving outcomes, DC adequacy is increasingly part of good workforce governance.