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great foundation. But, having built the
foundations, we now need to build the
house and there is a lot to do.”
Auto-enrolment has helped more
than 10 million people get on the road
to regular long-term saving since it
launched, of which about eight million
are members of NEST. However,
median balances remain woefully low.
A report from NEST and Vanguard
called How the UK Saves shows the
average balance in NEST is £760, or
£1,104 for active members. It attributes
this to the relatively recent introduction
of auto-enrolment, the short scheme
tenure of members, their lower-than-
average wages, and the fact minimum
contributions under auto-enrolment
only began rising from a low base in
2018. Contributions increased in 2019 to
a combined 8 per cent from workers and
employers, but it is only 8 per cent of
qualifying earnings in a certain band.
Steps to boost engagement
So what can the industry do to
improve engagement?
Dean suggests one
important way to
avoid alienating
people from
retirement
saving is to
balance long-
term and
short-term
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Engaging
low-earning
women
The UK has a huge gender pension
gap of as much as 40 per cent. The
median account balance in NEST for
women is just £327, compared with
£415 for men. Those earning less than
£10,000 who have voluntarily opted
in to auto-enrolment are much more
likely to be women than men, says
Matthew Blakstad, assistant director of
NEST Insight, but this does not reflect
more positive savings behaviour among
women – instead it is because women
are over-represented in low-paying jobs.
Women are three times more likely to be
under the £10,000 threshold, while men
are twice as likely to be in the highest
income bracket. NEST’s research
concluded that the gender pensions
gap is not driven by gender difference
in retirement saving and investment
behaviour, but by gender differences
in wages, careers and labour market
participation – essentially, structural
factors in the economy. To address the
shortfall in women’s retirement wealth
versus men’s, the pensions industry
should focus on differences in average
earnings and working patterns, NEST’s
research suggests. Lowering the
earnings threshold for auto-enrolment
could also help narrow the gap.
“Automatic enrolment
has been a great thing. It’s
popular, it’s got people
saving and it’s a great
foundation”
saving. Many people stop saving into a
pension when money is tight, so Dean
suggests encouraging them to build
up an emergency fund first so pension
contributions won’t be sacrificed
later on. “Maybe it would be better for
Sarah to put the next few pounds into
a liquid savings vehicle and let that
increase until she achieves a buffer –
then and only then should the money
go into a pension,” says Dean. “That
way we bring together short-term and
long-term goals.”
Another step providers can take is to
pay attention to what people like Sarah
care about. Her interest in the climate
and responsible investing, for example,
could be an ideal hook for pension
providers to draw her in.
Then there is the language used,
which is currently putting people off.
Iona Bain of Young Money says she
tries to avoid talking about retirement
and pensions altogether: “You can’t
force people to be interested in
pensions, but you can talk to them in
a way they understand. I talk about a
pot of money you can access when you
want to stop working one day and do
something else with your life.”
Self-employed workers left behind
Dean urges the pensions industry
to come together, not only to give
women in particular a better deal,
but also to help nudge self-employed
workers towards pension saving.
Sarah’s story illustrates how easily the
self-employed can get left behind. Of
the five million self-employed workers
in the UK, only a few thousand
have signed up voluntarily to NEST,
and there is no auto-enrolment
mechanism to bring them in.
Should the long-awaited Pensions
Dashboard ever become reality, this
could help engagement by giving
people more control and visibility
of their long-term savings and
various pension pots in one place.
If the industry can come together
to improve engagement, a more
financially secure retirement awaits
the Sarahs of the future.
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