Jamie Jenkins, Head of Pensions Strategy, celebrates the success of almost 10 million people being auto-enrolled in over 1 million workplace pensions.
Summer is a great time of year.
It’s warmer, and for most people that makes life more pleasant. And you’re perhaps thinking about forthcoming holidays or reflecting on those you’ve just had.
For some people, it just means slightly fewer emails and that’s enough.
But before you all drift off into a world without work, pause and think about what we’ve achieved in helping others do exactly that.
Put simply, I’m not sure we’ve done enough to celebrate the success of automatic enrolment. With almost 10 million people enrolled in over 1 million workplace pensions, we did something right.
More accurately, employers did.
By complying with their duties, employers have helped around 10m people – and counting – achieve a better outcome in retirement, although nothing is guaranteed.
Some said employers would wilfully avoid their duties – they were wrong.
Opt out rates among employees have remained low, too.
Some said people would opt out in their droves – they were wrong.
It appears employers have by and large complied with the April 2018 statutory increases. And we haven’t seen any material change in opt out rates.
Many commentators were wrong on that, too.
Of course, there’s still a legitimate debate as to whether ‘8% is enough’ and we’ll discuss that I’m sure for many years to come. But for millions of people 8% will be 8% more than they were saving before. That will make a difference to their retirement options, without doubt.
Automatic enrolment has become something of a cliché in pension terms, but it’s hard to ignore its success as a ‘policy intervention.’ I can’t recall another such policy on pensions which has enjoyed such thorough planning, benefited from enduring political consensus and had a smooth and orderly implementation. I speak to my counterparts in other countries frequently and it’s considered an amazing achievement to have got so many people saving without full compulsion.
It makes you wonder whether with the same approach we could achieve other useful societal nudges to get people doing other good things with their finances. And I’m not suggesting that all needs to sit with employers, by any means.
My wife and I recently had a little boy and when I reflect on the various interactions we had with ‘the system’, I wonder why I wasn’t nudged into considering things like a basic level of life cover, or a child savings policy such as a Junior ISA. Of course, some of this was marketed to me, but none of it was akin to the nudge of automatic enrolment. Yet it was an obvious trigger point, just as saving into a pension is when people start work or move jobs.
Perhaps we’ll return to such discussions when political bandwith returns.
Meantime, this summer, employers should reflect with pride that they’ve taken steps to improve the retirement outcome for millions of people.
Anyone who suggests otherwise is just wrong.
Pensions are an investment and as such, can go down as well as up in value. They could even be worth less than was paid in.
The views expressed in this article are those of the author and not Standard Life. Standard Life accepts no responsibility for advice that may be formulated on the basis of this information.