NEST has produced a chunky report that “takes the temperature of automatic enrolment”. This promises to be the first of a series and as the first has five years of accumulated insights to lay before us.
I thoroughly recommend it to anyone who has an interest in what people and companies are thinking and doing about auto-enrolment. Most especially I recommend it to those within pensions who spend their time with colleagues and clients who know about how the pension system works. NEST busy themselves with finding out about those who don’t and there is an authenticity about the document that derives from five years “in the real world”.
Here are the key findings.
Firstly, the 11m + unpensioned workers in the private sector who are or are to be enrolled are neither stupid or profligate. They pay attention to money. 86% say they scrutinise each monthly payslip. Go to moneysavingexpert and spend some time on the forums to check this out.
Secondly the “unpensioned” are keen to know more about long-term savings though distrustful. They have two key questions
- What happens to my money-where does it go and how safe is it?
- How much will it get at the end?
The report also looks at employers and concludes that the needs and support mechanisms for larger employers are different than for small. There are a number of good charts in the central portion of the report that demonstrate the challenge to “the industry” as we leave our comfort zone some time in 2014 and help mass-process hundreds of thousands of stagings a year.
The report suggests that not only is there not capacity for the support that schemes establishing pensions currently receive but that there is an expectation from small employers that their payroll, accountant, adviser or provider will come to their rescue. NEST are clearly worried that a false expectation is being allowed to take root.
For organisations in the middle (and I’d direct anyone her to table 3 on page 44 and Figure 7 on the following page) the insights surrounding “what’s really bothering corporates are excellent. For the larger companies its all about compliance, business integration and staff communication. For smaller companies it’s more about the pension scheme to be used though the administrative burden and staff issues are equally common with all size of companies.
The document pulls no punches. It states that “rather than being a niche minority, those coming into pensions as a result of automatic enrolment represent the mainstream of society”. By implication, it suggests that pensions as we know them are largely an upper middle class perk.
So when Steve Webb started his speech at yesterday’s launch
“whisper it quietly but we may just be witnessing a public policy success”
I for one was not about to disagree. Although it is not inside “NEST insight”, Tim Jones confirmed what I had heard anecdotally, that all data available so far suggests that opt-outs are running at no more than 10%, well below the Government forecasts , let alone those of the Cassandra‘s of the pensions world.
- It is going where other pensions will not tread, enrolling the transient low-paid and undervalued staff of the 2013 stagers
- It is setting a benchmark for charges
- It is creating a meaningful alternative to conventional lifestyle defaults
- It is publishing its research for the general good.
I have been critical of it in the past and I will continue to challenge its thinking – especially on people’s understanding of risk.
But at a time when we are beginning to need NEST, NEST is stepping up to the plate and making itself relevent in a refreshingly positive way.
- Seven in 10 private sector workers have no pension (telegraph.co.uk)
- “Comply or explain” – will “bottom up” regulation work for pensions? (henrytapper.com)
- Who’ll pay the price for an auto-enrolment train crash? (henrytapper.com)
- Taking meaningful investment choices off the shelf (henrytapper.com)
- Never mind the width – feel the quality! (henrytapper.com)
- OFT rattles pension consultant’s cage -shock! (henrytapper.com)
- Why we don’t need to fear a pension “advice gap”. (henrytapper.com)
- Right direction – wrong speed! Defining a “good” workplace pension. (henrytapper.com)