In the past, many employees, most notably those new to the workforce, have had little to no interest in pension and saving schemes. However, if the recent poll from the National Employment Savings Trust (NEST) is anything to go by, tides may be somewhat changing, with workers starting to become more engaged and interested in pensions and savings. This article is going to seek to unearth the main things that are having an influence on the changing attitudes regarding pensions and savings among the working public.
The auto enrolment process stipulates that UK workers earning at least £10,000 a year have to be automatically enrolled into a pension scheme by their employer. The employees have the option of opting out themselves, but many have chosen not to. Figures from the NEST poll show that 41% have stayed in the scheme in 2014, up from 22% in 2013 and that 77% of those polled think auto enrolment is a good idea, compared to 68% in the previous year. These enlightening figures are promising as they show that more people are seeing enough value in pension schemes to stay a part of them. This decrease in the figures points to a strong change in attitudes among some workers with regards to pensions.
The effect of auto enrolment on the changing attitudes towards pensions among the younger workforce is further supported by research conducted in 2013 by the National Association of Pension Funds (NAPF). It found that “53% of the younger workers surveyed said they planned to put more money by for their later years”. The research put this surprising interest in pensions among the young workforce down to a “rising of awareness” as a result of the “debate sparked by a huge pension shake-up”, of which auto enrolment is a key part.
The new pension rules that came into force on the 6th of April this year present what many consider to be the largest and most dramatic shift to the pensions system in some decades. The Telegraph reports that under the new system “individuals are given complete control over all the money in their retirement savings plans, whether big or small, for the first time”.
So what’s new? Well now, for the first time ever, anyone over the age of 55 has the ability to withdraw their entire pension as a lump sum, if they so wish. Thus, this overhaul gives older savers, as thisismoney.co.uk aptly puts it, “unrestricted access to their whole pension pots”, removing the need “to buy an annuity to provide guaranteed income for life”.
The NEST poll mentions that this recent pension’s overhaul is likely to have contributed to causing 40% of the participants aged 22-30 to think about planning for retirement sooner and 29% of the participants to increase their pension’s contributions.
So, as we can see, auto enrolment and pension freedoms both bear influence on workers attitudes towards pensions and savings, to varying degrees.
However, it must be noted that arguably deeper issues, like the lack of education about pensions, need to be addressed. Only then can there be a more profound change in attitudes towards pensions, to which should follow a higher engagement with, and adoption of pensions. This point is echoed by NEST’s research as they found that just 32% of polled respondents stated they understood pensions, with 20% respondents stating they didn’t. To which they concluded that the lack of understanding means that they are also likely “yet to be persuaded of the merits of pensions as a savings vehicle”.