Addressing the Growing Retirement Savings Crisis

Financial education in schoolsThe latest report on pensions from the Office of National Statistics has underlined just how important auto-enrolment is to addressing the UK’s retirement saving crisis. According to the ONS just 35 per cent of men and 32 per cent of women were contributing into a private pension of any sort in 2011/12, compared to figures of 49 per cent for men and 35 per cent for women in 1999/2000. Just 46 per cent of employees are now a member of a workplace pension scheme, the lowest level since records began in 1997.

Thankfully auto-enrolment, which started with the very biggest employers last October, is already starting to reverse that trend. The number of employees automatically enrolled into a pension scheme hit the one million mark in July and in the next four years all eligible employees will be enrolled.

Auto-enrolment will do a brilliant job of getting people into pension schemes. But making sure they do not opt out at a later date, and with time come to understand that they should increase their contributions, will also be crucial if the project is to be a success. For that to happen, attitudes to saving need to change.

We know that people find saving a difficult thing to do. Our recently carried out Get Saving research found three quarters of Britons believe the nation is in the midst of a saving crisis, with 32 per cent of people having £500 or less saved and one in four having stopped saving altogether.

People know they aren’t saving as much as they should do, but they are also open to the idea of being taught better habits. Our survey found 58 per cent of people see financial education in schools as a way of fostering a new savings culture amongst young people.

But this research also found that 53 per cent also believe auto-enrolment will help younger generations to get saving.

It goes without saying that auto-enrolment will increase saving. But it will only fulfil its potential if employees engage with their new workplace pensions, because when people engage, they generally achieve a higher income in retirement. Recent research from the London School of Economics found that where the delivery of a workplace pension is backed up by a strong communications programme, employees are 20 per cent more likely to pay at least 4 per cent of salary into a scheme.

Auto-enrolment makes offering staff a pension a bare minimum requirement for employers.  A well-designed education and communication programme will not only improve employees understanding of what their employer is contributing on their behalf, improving retention and staff loyalty, it will also help employees understand the extent to which the responsibility for their retirement falls on their own shoulders.

We at NOW: Pensions have communications materials that you can adapt for your workplace to help you engage your staff with their new pension. With so many workers sleepwalking to a retirement of poverty, we urge employers to do all they can to forewarn them of what is to come and what they can do about it.

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