One year on from the introduction of auto-enrolment and major issues remain, particularly the low level of contribution rates, actuarial consultants Buck have warned.
Philip Smith, head of defined contribution and wealth at Buck, said a 'huge learning curve' had been scaled in the first year of auto-enrolment, and some good progress made. He noted that opt-out rates were 'pleasingly low' at between 5-10%.
But Smith added: 'Current contribution rates are simply not high enough to ensure that people have enough to live on in retirement.
'Minimum contributions from both employers and employees into automatic enrolment schemes start at almost nothing. Even by 2018, when they reach the full minimum amount of the equivalent of 8%, a worker earning £20,000 per annum will only see £1,154.88 p.a. going into their pension pot.
'For these workers, who will probably have saved for decades with the intention of buying an annuity, they'll be lucky to get £100 a week; this is far removed from a comfortable retirement.'
Buck said the cost of implementing auto-enrolment was likely to become a significant issue for smaller companies as they join the scheme from this year onwards.
While the necessary technology had often been offered to larger companies for free, this was beginning to change.
'For one client, with around 6,000 members, the cost of implementation was close to £80 per member; a figure representing legal, technology, communication and payroll expenses,' said Smith.
'Additionally, the cost has meant that a significant number of businesses are reducing pension benefits for new joiners, to offer them the minimum under automatic enrolment or simply scaling down the contribution rate across the board.'
The firm also highlighted three main challenges for year two of auto-enrolment: expanding pension market capacity so employers have a bigger choice of providers; clarity for older workers on whether auto-enrolment would be a good deal for them; and protection for migrant workers' pension savings.