26 January 2015Back to news home
Research released today (Sunday 25 Jan) 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, which will be published tomorrow, suggests auto enrolment, which passed its two year anniversary in October, 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 suggest younger workers may be more proactive than the average.
‘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).
RS consulting conducted an online survey, on behalf of NEST, between 17 October and 2 November 2014 with a representative sample of 2,000 workers eligible for auto enrolment.
A NEST report last year found that the threshold for a comfortable retirement is around £15,000 a year, following research with pensioners of today. This threshold was based on a number of factors, including pensioners’ ability to afford everyday household bills as well as their sense of satisfaction with life. NEST found there was a significant shift in quality of life among pensioners living on a household income of £15,000 to £20,000 a year compared to those with less. With the State Pension worth around £7,000 once the flat-rate pension is introduced, this suggests retirees would need to find an additional £8,000 a year to live a comfortable retirement. With the introduction of auto enrolment, that should be within the reach of many.