Auto enrolment’s been hailed a success with over nine million people now enrolled in a workplace pension scheme. However, insights from the recently published Office for National Statistics’ (ONS) Wealth and Assets survey show much more needs to be done if we’re to crack the retirement saving challenge, with figures pointing to a huge lack of awareness around auto enrolment and pension saving in general.
According to the survey:
Only 63% of eligible employees were aware they had been auto enrolled into a workplace pension.
Of those employees who said they had not been auto enrolled, 91% of then actually had.
Only 42% of non-retired respondents said they knew enough about pensions to make decisions around saving for retirement.
The research also showed people’s views on what they thought the safest way to save for retirement was. While one in four people said paying into a workplace pension scheme was the safest way to save for retirement, it was interesting to note that almost a third of people (29%) choose property as the safest option. Some people may have good reasons for choosing property as a primary vehicle for retirement savings, but there could be many others who misunderstand how the different options work.
Looking through the findings its clear there are various issues and misunderstandings that advisers can break down for employers so they can help members engage with their pension. At a basic level many people don’t understand how pension schemes work. For instance, they don’t know how pension tax relief, employer contributions and appropriate investment strategies can boost the amount being saved into a pension over time. Addressing these issues could help people get over much of their mistrust about pensions.
In addition, as auto enrolment minimum contribution levels go up over time, advisers can explain that many people will need to save much more than these minimum levels if they want to generate a big enough pension to give them a decent income in retirement.
On a more individual level, advisers can also help people get past the barriers to starting pension saving. The ONS statistics show the reasons people give for not contributing to a pension scheme. These include:
A lack of trust around
A lack of knowledge
Advisers can help challenge many of the myths around these areas and help people feel more comfortable making retirement decisions.
Where people prefer to use different savings vehicles – for instance property or ISAs - advisers can play an important role in making sure people understand how these work to see if that product truly meets their needs.
So while auto enrolment has done a fantastic job so far in getting more people saving into a pension this is only the first step and advisers have a wider role to play than helping employers pick an appropriate scheme. Statistics like these highlight the many challenges people face when it comes to dealing with pensions and also show where advisers can really make a difference and help people plan for their retirement.
If you share these figures with employers it’ll help them to appreciate that many of their workers are still at first base when it comes to pensions, and this could form the basis for them to agree an engagement strategy with you.
Our workplace pension proposition comes packed with ways to help you to engage with your clients, and support members to understand what saving into a pension plan may mean for them.
ONS Wealth and Assets survey, August 2018
Department for work and pensions, Automatic Enrolment Review 2017: Maintaining the momentum, December 2018