It’s one thing to change behaviour through policy and legislation but it’s quite another to change attitudes.
When the government introduced automatic enrolment in 2012 the challenge they faced was to reverse a decade-long decline in pensions savings. Encouraging people to start thinking about their retirement when they have other immediate financial priorities was not easy.
Decisions about pension savings – where to invest your money and how much to save – can be complex and long term. This can make them easy decisions for people to defer, thinking they’ll come back to it later. But people need to start early when it comes to planning for retirement.
This is why the reform worked on the basis of inertia and creating a simple system that people had to actively opt out of rather than actively take part in. The results of this speak for themselves, with new figures out last week showing that 8.3m people have been automatically enrolled into a workplace pension and nearly 700,000 employers have met their duties across the country.
Crucially a large number of these new savers are under the age of 30. Almost seven in 10 eligible 22-29 year olds working in the private sector are now participating in a workplace pension. Starting early really does put you at an advantage for retirement planning and it is fantastic to see the younger generations embracing the opportunity.
We also know that fewer than 10 per cent of people are opting out of their workplace pension – far lower than originally expected.
Recent research shows that 83 per cent of employees now see saving through a workplace pension as routine and that 80 per cent are positive about the benefits of being enrolled onto a workplace pension. This cultural shift towards paying into a pension is a mark of how successful the policy is and shows that we are on the right track.
The research also showed that 79 per cent of those with workplace pensions would welcome increasing their savings alongside employer contributions. With contributions set to increase to five per cent in 2018 and eight per cent in 2019, a willingness to go further will be key. Far from seeing their pension as a cut from their pay packet, people are seeing the benefits that the saving will bring them in the long term.
While businesses, small and large, are helping people to save, it has benefits for the firms too. A pension is part of an employment package, helping recruit and retain staff, meaning the benefits far outweigh the costs. The continued support of business will be vital over the coming years, and as secretary of state for work and pensions, hearing the views and understanding any challenges employers face in this area is a priority for me.
The government’s work here is by no means complete either, which is why we are pushing ahead with our review of the policy. By bringing together experts from business and the industry such as Chris Curry, director of the Pensions Policy Institute, Jamie Jenkins, head of pensions Strategy at Standard Life, and Ruston Smith, trustee director at People’s Pension, it will help us to look to the future. The review will report back later this year and will help us take the policy to the next level.
Automatic enrolment has been a huge success in helping people save for a financially secure retirement and I am confident that employees and businesses will continue to support us in taking the next steps. Government alone cannot ensure that people have the retirement they want, but together we can make sure that Britain is saving for our futures.
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