Article Has auto-enrolment impacted attitudes to saving?

October marks the ten-year anniversary of auto-enrolment for workplace pensions. The landmark legislation has seen over 10 million employees auto-enrolled and benefiting from contributions to their retirement savings since 2012.¹

A decade on from its introduction, has auto-enrolment been a success? In many ways, yes. £28 billion more has been saved into workplace pensions in 2020 compared with 2012.² More women, young people and lower earners have kick-started their retirement savings journey.

By design, auto-enrolment helps employees to save for retirement without the need for them to actively engage with their pension. But, has this impacted attitudes to saving? To explore this, we partnered with the University of Edinburgh Business School to conduct research with a nationally representative group of 2,000 adults.

Auto-enrolment and employee attitudes to saving

Our research found that auto-enrolment has had a limited effect on employees' attitudes towards saving.

Benefits of auto enrolment

• 56% are taking a more active role in their future planning and saving. This increases to 62% in 18-34 year-olds.
• Younger people have an increased interest in saving for retirement in general, at 51% compared with 49% overall.
• Less people are opting out of their workplace pension than expected. 1 in 10 employees have chosen to do so within 1 month of auto-enrolment.³
• 76% said they feel saving for the future is important.
• 75% think paying into a pension is a positive thing.

These figures are promising, with employees feeling positive towards saving for their future. But with only just over half of employees taking more of an active role with their savings, there’s still room for improvement.

Drawbacks of auto-enrolment

• Inertia – 48% are now less likely to take action on retirement saving, as they think it’s done for them. This is known as the power of inertia, or ‘going with the flow’.
• Saving complacency – 52% feel confident they’ll have saved enough for retirement (rising to 62% in the 18-34 demographic), yet 56% have no idea how much they pay into their workplace pension. This could mean employees are simply assuming they’re saving enough, without actually knowing.
• While 39% said they were keener to save because of auto-enrolment, 45% said they paid less attention as a result. This figure increases to 56% in younger age groups.

We know from our financial wellbeing research that on average, we’re not saving enough to afford a comfortable retirement.⁴ The drawbacks of auto-enrolment could result in many not achieving the level of comfort they hope for in retirement.

What does the impact of auto-enrolment mean for you?

Auto-enrolment has reduced active decision-making for some employees when it comes to their pensions. With this in mind, how you communicate pension benefits with your employees could play a significant part in inspiring them to engage with their savings.

Our findings have identified three types of engagement style. We’ve listed these and offered resources to help you build engagement with your workplace scheme.

Engagement styles and suggestions

Our research identified three key types of engagement, which could refine the ways you support your employees with their workplace pensions.

Cognitive engagement

Cognitive engagement is around improving and increasing the awareness and understanding of pension saving and the options available.

• Only 37% of those surveyed know how much their employer contributes to their pension.
• 48% would like more guidance from their employer on how much they should save to achieve their retirement goals.

Clear, regular communications could help your employees understand the role you play in their workplace pension and put pensions to the front of their minds more often. Signpost our Customer Money Tips hub for tips and insights on pension saving, retirement planning and everyday money. Plus, our Retirement Planner tool could help employees work out how much they’ll need in retirement and how much to save to achieve this.

Affective engagement

Affective engagement is around emphasising the importance of longer-term saving.

• 47% worry they won’t have enough money when they retire.
• 84% want to make sure they can keep doing the things they enjoy in retirement.

By increasing interest and motivation in saving for the future, you have the potential to reduce any worries your employees may have. A way to do this could be to help them clearly visualise what they want their future to look. Our Financial Wellbeing hub has a range of tools and resources to help them do this. This includes our Picture your best life tool, financial planning templates and tools and more.

Behavioural engagement

Behavioural engagement focuses on employees taking active steps to engage with and stay informed about their pension.

• 24% say that they only check the amount saved in their pension once a year.
• Only 53% actively keep a track of pensions from their previous workplaces.
• 77% of those with multiple pension pots said that it’d be useful to see all pension savings and investments in one place.

There are lots of things you could do to inspire behavioural engagement. As a first step, encourage employees to activate their online pension accounts if they haven’t done so already, and keep their details up to date. Our article 5 reasons to be proactive with your pension offers some insight for employees on why it’s important to engage now.

For those who may have lost track of old pensions, the government’s Pension Tracing Service could help. If they want to consider keeping their pension pots in one place, point them to MoneyHelper’s article on transferring pensions to help them find out if it’s the right choice for them.

Overcoming the barriers to engagement

Breaking the barriers to engagement may rely on a combination of all three engagement styles. Nudges, personalised information, guidance and tools could all help to tackle some of the fundamental challenges.

You have a central part to play in supporting your employees. But remember, there are wider barriers to engagement within society, and a larger collective responsibility needed to overcome them.

For more tips on engaging employees with their savings, check out our new infographic.

Help keep your employees on track for retirement

The implementation of auto-enrolment has helped millions of employees make a start with retirement saving. Employees are feeling more confident and optimistic for retirement – yet ‘going with the flow’ has caused some to be less actively engaged with their savings.

Employees need support from you, the wider industry and the government – to drive engagement and keep their savings on track.

For a more comprehensive overview of our auto-enrolment research and findings, read our whitepaper prepared by academics at The University of Edinburgh.