Confidence in pensions has risen significantly in the past 12 months, particularly among employees already saving in a pension scheme or who have already been automatically enrolled into a workplace scheme, reveals the latest Workplace Pensions Survey by the National Association of Pension Funds (NAPF).
The NAPF’s Confidence Index, which measures the difference between the number of respondents who are confident and not confident in pensions compared to other forms of retirement saving, increased to -2 in this survey from -17 last October – the highest score since 2010 – with 44 per cent of employees now very or quite confident. During this period, 1.6 million people have been automatically enrolled into a workplace pension scheme.
Confidence is higher (59 per cent) among those who were already in a pension scheme and those who have been automatically enrolled than among those who do not save in to a scheme (28 per cent). This is a rise since October 2012, when 50 per cent of those already saving in a pension were confident in pensions compared to other ways of saving. At 53 per cent, men are more likely to be confident than women (35 per cent).
Similarly, more people (67 per cent) who were in a pension scheme or have been automatically enrolled are more confident about managing their pension, compared with 49 per cent of those who do not save in to a pension.
Joanne Segars, Chief Executive, NAPF, said:
“We knew that automatic enrolment would be a game changer but it would appear that it has had a positive impact on confidence in pensions, too, which is very welcome news indeed. It’s heartening, too, that three-quarters of employees yet to be automatically enrolled have heard about the scheme.
“However, as up to ten million people are brought into pension savings by 2018, the challenge for all of us in the industry is to keep opt out rates low, increase confidence in pensions and encourage people to save more for their retirement. To help achieve this, the NAPF is at the forefront of driving up standards of quality, governance and transparency in DC pension schemes.”
The survey reveals positive findings about younger people’s behaviour and intentions. The last year has seen the biggest rise in pension scheme membership among those aged 18-44 – from 41 per cent in 2012 to 48 per cent now. And significantly, those aged 18-24 who are saving in to a scheme, including those who have chosen to stay auto-enrolled, are most likely to consider saving more into their pension in the future than those aged 45-64 (88 per cent and 51 per cent respectively).
The Workplace Pensions Survey shows that opt-out rates for those who have been automatically enrolled are, at 12 per cent, relatively low. Of this group, 44 per cent explained that they cannot afford to save into a pension.
The number of people considering staying in a pension scheme when they are automatically enrolled remains similar to the NAPF’s previous survey (around 60 per cent). The NAPF believes this is not higher possibly because some employees may have previously opted out of their employer’s scheme, may never have been offered a pension and so don’t understand how it could work or are worried about losing some of their earnings to pension savings. Of those waiting to be enrolled and who do not currently save into a pension, 47 per cent said they cannot afford to save into a pension. The communication and engagement strategies undertaken by small employers as they prepare for automatic enrolment have the potential to help these employees consider staying in their pension scheme.
When it comes to thinking about retirement, the biggest worry revealed by the survey is the fear of not enjoying retirement. The report claims that this is unsurprising, given that the average Defined Contribution pot size at retirement is only £28,000.
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