Research Says Automatic Enrolment into Pension Schemes Could Create Extra Savings
Tuesday, October 18th, 2011A research has recently suggested that automatic enrolment into pension schemes could actually create an extra six million people saving. Standard Life, the company behind the said research study, also said that the automatic enrolment into pension schemes could actually help generate £12.5 billion annually to the retirement pot by 2017.
The Keep on Nudging report, developed with academics from the University of Edinburgh, was based on a survey of more than 600 employees. The employees reportedly represented the “squeezed middle”, earning £18,000 to £45,000 a year. According to the research, just about 48 percent of the respondents said that they would find it easy to save an extra £50 a month if they had to. However, the respondents also said that communication was crucial to the scheme’s success. Under the pension reforms, all eligible employees will need to be automatically enrolled into a qualifying workplace pension scheme.
The report showed that: “Making carefully designed communication a priority can ensure the success of auto-enrolment. By our calculation it will add six million new people saving for retirement, with increased annual retirement savings of £12.5 billion annually by 2017 – fully in line with the DWP (Department for Work and Pensions)’s ambition.”
The report also allegedly found that 26 percent of the employees who have never had any form of pension would choose to opt-out. This would apparently be significantly higher than the 12 percent who only opt-out among employees with some prior or current form of private pension saving. The report said this confirmed the continued need for financial education.
A Department for Work and Pensions spokesman said: “Our reforms will get millions saving into workplace pensions, many for the first time.
“It’s vital that people understand these changes so we are working with industry and consumer organisations on ensuring people know how automatic enrolment can help them save for their retirement.”
