Pensions becoming a national priority, says NEST
26 January 2015
Research released by NEST reveals that pension saving is fast becoming established as a national priority.
In a poll of consumers, when asked how they would allocate their money if they had more of it to spend, ‘saving for retirement’ ranked third in importance for the second year running, coming behind only holidays and saving for a rainy day on a list of priorities.
The research from NEST insight 2015, suggests auto enrolment, which passed its two year anniversary in October 2014, may be playing its part in driving this new national attitude. Support for the policy continues to grow, with more than three quarters (77 per cent) of consumers agreeing it’s a good thing, up from 68 per cent in 2013 and 63 per cent in 2011.
Even people who’ve opted out so far are warming to the idea – they are now twice as likely to say they’ll stay in next time. 41 per cent now say they’d stay in when re-enrolled, compared with just 19 per cent in 2013.
The new pension freedoms announced in the 2014 Budget may also be influencing people’s attitudes to retirement saving. Fears of pensioners buying expensive cars and squandering their money appear unfounded after only 7 per cent of people say they plan to take their whole pot out at once and do whatever they like with it.
In fact, the new freedoms may be making UK workers even more switched on. More than one in three (34 per cent) people say they’ll think about their retirement plans sooner and 29 per cent say they plan to pay more into their pension as a result of the reforms.
But the real surprise was how the proposed changes have gone down with younger people, who seem to be significantly more engaged following the reforms. Two fifths (40 per cent) of 22-30 year olds say they’ll start to think about what to do with their retirement income sooner thanks to the new options open to them at retirement and a significant proportion (36 per cent) also say they’re more likely to increase payments into their pension as a result. This suggests younger workers may be more proactive than the average.
Tim Jones, CEO, NEST Corporation says:
“It is hugely positive to see that pensions are becoming embedded as a national priority. Until recently, millions of people were not saving for retirement. Auto enrolment and now the new pension freedoms have changed all this – reform is leading to a pension revolution. Five million more people are now saving for their future and support for auto enrolment continues to grow, even among those who have so far opted out. It shows just how far we have come. Saving for later life is fast becoming the ‘new normal’ which is fantastic news.”
Understanding about what the pension reforms mean is still patchy, however. Just over half (52 per cent) of survey respondents were unaware they had happened and more than a fifth (22 per cent) admitted they still do not know what they would be most likely to do with their pot when they come to retire.
Of those who did know what they might do, most people (32 per cent) wanted some form of flexibility, with the rest mostly split between preferring a drawdown type product (19 per cent) or something that resembled an annuity (16 per cent).
NEST insight 2015 is available to download through the link below. See page 55 for the CIPP’s contribution.
About NEST insight
NEST insight is NEST’s annual snapshot of the auto enrolment landscape. It looks at the behaviours and attitudes of members enrolled into workplace pensions and the experiences of employers who have set up schemes to comply with the new duties. It also looks ahead to consider the workers who’ll be enrolled in the coming years and the employers yet to reach their staging date.
Views are based on feedback gathered over the year from NEST customers, and quantitative and qualitative research among consumers, employers and intermediaries. They have also looked at research conducted by The Pensions Regulator, the Department for Work and Pensions and trade bodies, consumer groups, the pension provider community and other government departments.