What did the pandemic mean for workplace pension savings?
According to new research, three-quarters of savers were happy to be automatically enrolled in their workplace pension scheme during the pandemic.
The research by online pension provider PensionBee found that a third of savers said being auto-enrolled highlighted the importance of saving for the future.
Only 18% of respondents said they regret joining the pension scheme and paying contributions, with the poor performance of investment funds or financial difficulties the main reasons for this regret.
Overall, 83% of the respondents agreed that all employees should be automatically enrolled into a pension scheme, regardless of their age or earnings.
According to PensionBee, the findings suggest an increasingly positive attitude towards auto-enrolment in workplace pensions, initially launched by the government to encourage more people to save for retirement.
Since it was first introduced in 2012, auto-enrolment has resulted in a significant increase in the proportion of workers saving into a workplace pension. Participation in workplace pensions has almost doubled for 22 to 29-year-old workers during that time.
Earlier in the year, research from workplace pension provider NEST found that the pandemic coincided with a slight increase in employees opting out of workplace pensions. The rate reached as high as 13% during the first lockdown. There was a further increase in opt-outs last summer.
However, by last September, opt-out levels fell to meet levels seen in the second half of 2019, before the onset of the pandemic, suggesting that employees have not changed their attitudes towards saving in a workplace pension.
The latest official figures show that more than £100 billion is now saved annually in workplace pensions.
Kate Smith, Head of Pensions at Aegon, said:
“Today’s figures highlight the huge progress made over the last ten years in encouraging people to save for their retirement. Prior to auto-enrolment less than 50% of private sector employees had a workplace pension but today that figure is closer to 90%. The sums now being paid into workplace pensions are very significant and the combination of public sector and private sector pensions mean more than £100bn is being put away annually. Gaps still remain however, particularly among employees in the smallest private sector companies where only around 60% of people have a pension.
“There was some concern last year that the economic shock of the pandemic might have led to widespread opting-out of long-term saving such as workplace pensions to meet more immediate financial concerns. However, today’s figures suggest just the opposite. Last year there was a slight dip in the numbers of people actively opting-out of workplace saving and at 0.5% the figures were reassuringly low demonstrating the resilience of auto-enrolment.”
We still expect the Department of Work and Pensions (DWP) to ultimately lower the auto-enrolment lower age threshold to 18 and scrapping the lower limit on qualifying earnings, leading to more employees being automatically enrolled.
PensionBee chief executive Romi Savova welcomed any reduction to the current age and contribution thresholds, saying:
“The introduction of auto-enrolment has done a lot to compel people to save, while making the process as easy as possible for consumers. However, for too long, a significant proportion of the population have missed out on this sizeable benefit.”