Momentum remains strong for enrolment
Employee membership increased by 28% over the previous fiscal year. Whilst the overwhelming majority of active Nest members were automatically enrolled by their employer, a significant minority (8%) actively chose to enrol, equating to over a quarter of a million members.
This cohort is skewed towards women, in particular those earning less than £10,000 per year and to those under the age of 25. Opt-out rates remain low at 7%, following the increase in minimum contribution rates in April 2018.
Nest membership
By the end of the fiscal year 2018/2019, membership neared 8 million members across a total of 826,000 employers. Nest membership skews modestly to younger workers many of whom have incomes below the national median level. Nearly half are below the age of 35 and more than half earn less than £20,000 a year.
While most (98%) of the employers that use Nest are small firms with fewer than fifty employees, a large percentage of the membership work for large and mid-size firms. Less than 1% of Nest employers had 250 or more workers, but these firms employed 36% of Nest members.
Nest employers and members span the UK both geographically and by industry type. Retail, Construction, Health and social care, and Catering and accommodation are the top industry sectors, representing 27% of employers.
Gender pensions gap remains, despite no difference in savings behaviours
Median balances for female members are 79% of the median balance for male members. Recent research from Nest Insight and Vanguard found this disparity to be due to structural factors in the UK labour market disproportionately affecting women, such as lower earnings, over representation in low paid sectors and job turnover. This inequality can only be rectified by continuing to identify and challenge these structural factors wherever they are found.
Member engagement increasingly facilitated by technology
Since Nest’s launch, around 25% of active members have registered to access their account online. Webchat tools are an increasingly popular method of interaction amongst Nest members with a three-fold increase in webchat interactions during the 12 months to 31 March 2019 compared to the 12 months to 31 March 2017. Since January 2019, mobile and tablet devices have become the dominant channel for members’ digital interaction with Nest (54%).
Will Allport, Senior Retirement Strategist, Vanguard, commented: “The report provides a unique window into the financial experiences of low to mid income earners, a cohort who have traditionally been overlooked by pension provision. It is particularly encouraging to see the increase in minimum contributions having such a small impact on member behaviour.
“A trickier task is addressing the shortfall of female retirement wealth relative to male. We should refocus our attention on the differences in average earnings and working patterns between genders. Furthermore, lowering the earnings threshold for auto-enrolment eligibility, or making contributions on the first pound of earnings rather than adhering to the lower earnings limit, would both help to narrow the disparity.”
Matthew Blakstad, Assistant Director of Nest Insight, comments: “This second annual report paints a striking picture of the rapid adoption of workplace pensions among employers and employees, many of whom are new to retirement savings. Looking back to October 2012, we see that Nest had just 2,000 members enrolled by 175 employers, and minimal assets under management. By the end of March this year, we had 8 million members, working for over 800,000 employers, and £5.7 billion in assets.
“This represents a huge change to the long-term financial wellbeing of people in the UK. That makes it all the more important to monitor and understand the experience of auto enrolled savers. We look forward to tracking the evolution of workplace pensions through future reports.”
For the full report, including in depth analysis of the topics covered above, as well as adequacy rates, Nest’s investment returns, asset allocation, transfers and disbursement, please visit here
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