Pensions - Articles - Research reveals the effects of phasing in saving

NEST Insight’s latest research, published today, looks beyond the headline opt-out and cessation figures to explore more deeply how the April 2018 rise in minimum auto enrolment contributions impacted savers.

 By surveying NEST members before and after the rise, these valuable findings provide insight into how peoples’ financial circumstances are developing over time. With the next contribution rise on the horizon, the research sheds light on how savers may respond to the increase.
 Key findings:
 • Very few members (1 in 20) think too much of their income goes into their pension.
 • After the increase, over a quarter of members (28 per cent) thought about increasing their contributions further.
 • Around half of NEST members (51 per cent) didn’t notice an increase in their pension contributions.
 • After the rise, there was a slight overall increase in confidence in being able to provide for retirement, and members aged over 60 became more likely to consider their pension as their main source of income in retirement.
 • There was no evidence to suggest that there had been a negative impact on levels of overall debt or non-pension saving behaviours.
 Will Sandbrook, Executive Director of NEST Insight, commented: “There are extremely positive signs emerging from this research, and indeed there are many reasons to believe the next rise in April 2019 will result in a similarly low impact on cessations and opt-outs. Few members think that they’re contributing too much of their income into their pension and indeed over a quarter told us that after the initial increase they thought about increasing contributions further.
 “Whilst inertia has clearly been harnessed as a powerful force of good, we do need to be mindful of the flipsides. In our surveys, most members told us that they check their payslips, but about half didn’t notice a change in their contribution amount. This low level of awareness suggests it’s unlikely that people are questioning whether they’re contributing enough. For those on lower and moderate incomes, who might otherwise expect to rely solely on the State Pension, auto enrolment is likely to provide a very meaningful uplift in their retirement income and quality of life in retirement. However, some people may need to take further action to achieve the retirement outcome they’re hoping for. Getting people to engage with retirement outcomes rather than inputs is an important first step.

 “We also need to remain aware of the broader financial context in which people save for retirement. Whilst there’s little, if any, evidence to suggest that savers are funding increased pension contributions through debt, our work does highlight three groups to monitor as we move forwards. These include people who are more likely to be over-indebted or struggling to save outside of their pension. As our sidecar research highlights, helping individuals get the right balance of short and long-term savings is integral to improving overall financial wellbeing.”
 Emma Douglas, Head of DC at Legal & General Investment Management, commented: “This new research from NEST Insight helps to validate our assumption that the rise in contribution rates in April 2019 should have a minimal impact on opt-out rates. This is in line with our experience of the April 2018 increase where opt-out rates did not rise as a result.
 “The survey also shows that people are still not engaged enough in saving for their retirement and whilst auto enrolment is a step in the right direction it will not be enough for the majority of us to secure a comfortable retirement. As an industry we need to do more to give pension savers the support they need to achieve the retirement that they want as well as tools to help them work through day-to-day financial pressures, as short-term money worries loom much larger than long-term savings. This is why LGIM has recently launched its new financial wellbeing hub which offers members helpful information about budgeting, debt management, mortgages and other financial information to help them make good financial decisions and plan for the future.”

 The auto enrolment experience over time 

 How the UK Saves: The effects of phasing 

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