Pensions Minister Steve Webb was joined by leading international academics at the first NEST Forum, held (last week) in London.
The event revealed insights of consumer experiences and attitudes to saving from around the world, including evidence from countries where automatic enrolment is already in place.
Research highlights:
Director General of the ABI, Otto Thoresen, said that despite some estimates for potential opt-outs in the UK being higher than is experienced in other countries, ABI research reveals that 81 per cent of people say they want to save for retirement. According to him the challenge for pension providers is to help them start saving, and keep saving.
Research by Professor Michael Sherraden of the University of Washington, St Louis, revealed that good structure and product design are more important than the characteristics and habits of individuals. He argued that this means behaviour can be influenced. US data showed that employers matching contributions up to the level of an individual increases saving motivation. However if an employer significantly increases their contributions, this can actually have an adverse affect, in some cases demotivating employees from saving more. His research also demonstrated that while up to ten hours of financial education made a difference, thereafter there was no effect on savings habits.
GfK Financial research confirms that 'times are tough' for consumers, according to Nick Watkins, Managing Director, with many focusing on the 'here and now' by paying off debts or trying to get on the property ladder. The research showed that many people aren't saving enough and most expect to work longer.
New Zealanders have embraced KiwiSaver, according to Dr Claire Matthews of Massey University. Opt-out rates are currently just over 11 per cent (New Zealand Inland Revenue Statistics). Of those who were surveyed who had a KiwiSaver, over 50 per cent had no prior savings and gave the most important reason for joining as 'it's important to save for my retirement'. Reasons given for non-membership included affordability, having other savings products and a lack of trust in Government.
Professor Margaret Sherraden of the University of Missouri, St Louis presented research suggesting that people on low incomes say they want to save but need help to do it. Research shows that having clear goals for savings levels is motivating for low income savers, and that saving gave low earners a sense of hope.
Parents' saving habits have a big impact on how their children behave, according to a study by Professor Thomas Shapiro, Brandeis University, and for low income families in particular, parental saving can improve social mobility. His study highlights the impact of the current economic conditions on low-income families who are having to raid their savings to get by, and lowering their aspirations for the future. His study also suggested that amongst lower earning groups in the US there was no concept of voluntary retirement, only retirement from physical necessity.
Research conducted by NEST among its target market shows that most people aren't confident about provision they have made for retirement so far. The research also shows positive attitudes towards automatic enrolment, with 64% agreeing that it is a good idea, while only 17% strongly disagree. Savings growing for retirement, confidence from reducing worries that "you hadn't done anything" and not wanting to lose employer contributions are given as important factors for staying in the scheme when automatically enrolled.
Speaker highlights:
Pensions Minister Steve Webb called for an end to the doom and gloom surrounding the debate on pensions and said there is a hugely positive story to tell. He urged the savings industry not to run down pensions saving and automatic enrolment. He said it is vital to get people enthused about pensions saving ahead of the onset of automatic enrolment in October. Clear communication and initiatives such as operation ‘big fat pot' are needed to build excitement, he argued, as well as allowing people to see their pots grow and helping them understand what they will gain in retirement. He also said that pensions saving could become impulsive if options such as cash-point contributions were explored, and that automatic enrolment and minimum contributions are just the first stage of a journey.
Baroness Drake of Shene, CBE, argued that savers' interests are not always put first in the pensions industry and that automatic enrolment was an opportunity to make sure consumers come first. She urged pension providers to consider things such as the design of the default fund and fund manager performance, and called for providers to have a duty to act in members' interests.
The event was wrapped up by a lively Q&A session chaired by Guardian Leader Writer Tom Clark. Tom McPhail, Head of Pensions Research, Hargreaves Lansdown, Doug Taylor, Financial Services Chief Advocate, Which? and David Yeandle, OBE, Director, Government Relations, European Employers Group, were among the panel members.
Following the event, NEST CEO Tim Jones said:
"It was a privilege to host a gathering of such eminent experts in their fields. We will take insights from this research and use it to inform our approach as NEST prepares to help millions of people towards achieving their retirement aspirations. We hope others will also benefit from sharing this work. 2012 is the start of fundamental change in UK society, and we are looking forward to playing our part."
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