Attitude to saving

Why auto-enrolment has had little impact

Attitude to saving

On Wednesday 1st August, data from the Office for National Statistics (ONS) showed that despite more than 9 million people being auto-enrolled into pension schemes since 2012, their attitude to saving has remained unchanged.

Portafina’s Managing Director, Jamie Smith-Thompson, talks about the reason why this is the case.

“The way that the government has set up auto-enrolment has ensured that employees have to save because the system has already put everything in place for them to do so. And that means, people don’t necessarily need an immediate attitude on it.

I think it’s a great idea to make employer’s saving compulsory to help with their workforces retirement, especially when it comes to helping those on the lowest levels of income who usually find themselves without pension benefits. Yet, if the government are looking for some sort of praise for a job well done, that’s not going to happen right now. We will only know that in the next 20 or 30 years when employees come to retire and can compare what they would have had without auto-enrolment.

And that’s where we might be able to see their attitudes changing. Seeing the rewards of auto-enrolment, what they have invested and the compound interest that has helped their money grow, might help people to appreciate what they have saved. It would be ideal for people to think that as they are saving now, they will try to save even more. The reality is, a lot of people can’t afford to do that. That’s why I do think it’s a bit of a master stroke to make it compulsory for employers to enrol their employees in pension schemes.

It really doesn’t surprise me that attitudes to auto-enrolment remain unchanged. Pensions are slow-burners until you find yourself at retirement and then you suddenly think that you should have tried to save before you get there. The fact is, the big swings in changes of opinion don’t happen quickly within pensions as they are a long-term investment. And as the Retirement Outcomes Review has shown, clients just want to know that they are being looked after. This is something that all companies can learn from and as soon as they understand that, the better.

Like with most things, people’s attitude to saving is going to take some time and of course, some proof. It will be interesting to re-visit this and see the full impact of auto-enrolment and how people view it further down the road.” 

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