Publication type
Report
Authors
Publication date
August 1, 2024
Summary:
Automatic enrolment into workplace pensions is a strong policy intervention designed to address shortfalls in retirement saving among the working age population. A broad evidence base has established that the policy substantially increases pension participation rates, leading to higher average saving within the pension. However, it is possible that the effect of automatic enrolment in generating new saving within the pension might be offset by less saving elsewhere within the individual’s finances. This project focused on how pension automatic enrolment affects other forms of saving.
This is an important issue because, as our analysis shows, the effects on automatic enrolment of generating new pension contributions among employees are highly persistent. Evidence shows that opt-out rates are persistently low, as are cessation rates (whereby individuals do not opt out but do cease to make contributions at a future point in their employment). In our recent analysis of opt-out, cessation and pension withdrawal rates during the past few years, published earlier in this project, we show that despite the increases in the cost of living, these rates have remained low.
The main analysis undertaken in this project examined how pensions automatic enrolment affects other forms of saving using data from the UK.
The analysis reveals a series of new insights into the savings behaviours of the Nest automatically enrolled population.
The findings from the project have potential policy implications relating to the broader financial wellbeing of individuals who experience pension automatic enrolment.
Overall, the new findings form this project are consistent with a broader body of work that has developed over recent years on how automatic enrolment affects broader personal finances. Nest Insight is of the view that the future shape of personal finance policies like auto enrolment need to be developed through the lens of improving overall financial security. A narrow focus on increasing pension saving fails to take into account the inter-connectedness of savings, spending and borrowing behaviour. In particular, there would be merit in incorporating some element of emergency savings into the future evolution of pensions automatic enrolment, for low to middle income households.
Subjects
Links
- https://www.nestinsight.org.uk/how-does-pensions-automatic-enrolment-affect-savings/
- https://www.nestinsight.org.uk/how-does-pensions-automatic-enrolment-affect-savings/
- https://www.nestinsight.org.uk/wp-content/uploads/2024/08/How-does-pensions-automatic-enrolment-affect-savings.pdf
Notes
Foreword written by Matthew Blakstad, Nest Insight. © 2024 National Employment Savings Trust Corporation.
Related Publications
-
How does pensions automatic enrolment affect savings?
Christopher Firth, John Gathergood, Jesal Sheth, Neil Stewart,Media - 20240808
#578339