A new policy evaluation case study from Understanding Society says people automatically enrolled in National Employment Savings Trust (Nest) pension schemes have benefitted by saving for retirement, but still have few other savings to fall back on.
Automatic enrolment into pensions saving was rolled out over six years beginning in October 2012 to encourage more people to save for retirement. The policy requires employers to automatically enrol workers into a workplace pension if they were:
- not already in a qualifying pension scheme
- aged 22 or over
- under State Pension age
- earning more than £10,000 a year.
Before the policy was introduced, the government estimated that up to 11 million workers were not saving enough for retirement. Research has since shown that more people are enrolled in pension schemes, and that those who were auto-enrolled were more likely to take on a mortgage. It’s also been found that the mental health gap associated with pension non-participation has been eliminated.
However, this research found that the average amount saved each month by people who were auto enrolled into a Nest pension and also paying into other savings accounts was £338 – and the pension policy had not affected this figure. This highlighted a lack of accessible savings many in this group have to fall back on if they face a financial shock such as an unexpected bill or interrupted income. So, while the policy was unlikely to have been detrimental to their savings, it may not have reduced this group’s financial precariousness.
The case study suggests that any future reform of the auto-enrolment policy might consider emergency access or so-called ‘sidecar savings’, or auto-enrolment into long-term savings.
This research used Understanding Society Waves 1-13, 2009-2022, harmonised British Household Panel Survey data (Waves 1-18) and the Linked Nest Auto-enrolment Pensions Dataset, 2014-2022
