28 January 2014
Back to news homeConsumers have given a quiet welcome to automatic enrolment, with NEST reporting high awareness among the target market for automatic enrolment (86 per cent) and low opt-out rates (around 8 per cent on average at NEST, and around 10 per cent across the industry) after the first full year.
NEST’s annual research report, NEST insight (PDF), finds that saving for retirement has gone up the priority list for consumers, rising to third place in 2013 from seventh place in 2011.
The report also highlights challenges to come, including helping consumers bridge the gap between what they’re likely to want in retirement and their confidence in achieving those goals. Only 9 per cent of consumers say they are confident that their current and future saving will be enough to provide for them in retirement, compared to 14 per cent in 2011.
Whilst opt-out rates are low on average, they are not consistent across age groups. Rates can be around double the average level among people aged 50 and over.
Employers report high awareness of their new legal duties, but research suggests that many are hazy on the detail of what they need to do.
The NEST research has revealed gaps in the employer experience, for example between assumptions made before staging and the reality of the experience. Many employers who have now completed their implementation encountered unexpected challenges along the way. They were also surprised at how long it took and how many people across the business needed to be involved.
Of those employers that have already staged, one fifth took over 16 months to prepare and 55 per cent reported having difficulty understanding the legalities of the reforms.
With up to 30,000 employers expected to stage in 2014 helping employers understand what they need to do to meet the requirements of the duties and ensuring they plan ahead will be a challenge, the report suggests. These employers have fewer resources than the larger employers who have staged up to now. Although research suggests awareness of the reforms is high, many employers haven’t started making plans around what they need to do and appear to underestimate how long it can take. Many also lack internal expertise and pensions knowledge. The research suggests there is a clear expectation of help being available to 2014 stagers from intermediaries and others.
Commenting on the findings, NEST's chief executive Tim Jones said:
‘It seems to be ‘so far so good’ for automatic enrolment for consumers, which is welcome news, but we are only at the start of a much longer journey and it’s clear there are challenges to come. For the longer term we all need to work harder to build confidence about pensions among consumers, and to make sure all age groups understand the benefits a workplace pension can bring.
‘With awareness of the reforms so high, it’s also clear that there will be an expectation among workers that their employer will put them in a workplace pension and be ready for the changes.
‘What’s less clear is how prepared the next waves of employers are. Our research suggests there are gaps in their knowledge, experience and preparedness. Getting automatic enrolment right is about more than putting a qualifying workplace pension in place. There’s a clear role for all of us in helping ensure the next stages of automatic enrolment are a success, with many employers reporting that they expect help from a number of sources. Key among those will be the intermediary sector.’