Article Has auto-enrolment impacted attitudes to saving?

Over a decade ago, auto-enrolment for workplace pensions was introduced in the UK. This meant that employers automatically enrolled certain employees into its workplace scheme – helping staff save towards their retirement.¹

The landmark legislation has seen over 11 million employees auto-enrolled as of 2021, and benefiting from contributions to their retirement savings since 2012.² A decade on, has auto-enrolment been a success?

In many ways, yes. Research shows that, prior to its introduction, workplace pension scheme participation levels were at 47% in 2012 – compared with 79% in April 2021.³ In 2021, employees saved £114.6 billion into their pensions – that’s a £32.9 billion increase since 2012. More women, young people and lower earners have kick-started their retirement savings journey as a result, too.⁴

By design, auto-enrolment helps employees to save for retirement without the need for them to actively engage with their pension. But, has this impacted attitudes to saving? To explore this, back in 2022, we partnered with the University of Edinburgh Business School to conduct research with a nationally representative group of 2,000 adults.

Auto-enrolment and employee attitudes to saving

Our research found that auto-enrolment has had a limited effect on employees' attitudes towards saving.

Benefits of auto enrolment

• 56% are taking a more active role in their future planning and saving. This increases to 62% in 18- to 34-year-olds.
• Younger people have an increased interest in saving for retirement in general, at 51% compared with 49% overall.
• 76% said they feel saving for the future is important.
• 75% think paying into a pension is a positive thing.

With the number of employees choosing to opt of auto-enrolment generally remaining low, these figures are promising.⁵ This shows us that they feel positive towards saving for their future, but there’s still room for improvement.

Drawbacks of auto-enrolment

• 48% are now less likely to take action on retirement saving, as they think it’s done for them. This is known as the power of inertia, or ‘going with the flow’.
• 52% feel confident they’ll have saved enough for retirement (rising to 62% in the 18-34 demographic), yet 29% have no idea how much they pay into their workplace pension. This could mean employees are simply assuming they’re saving, without actually knowing.
• While 39% said they were keener to save because of auto-enrolment, 45% said they paid less attention as a result. This figure increases to 56% in younger age groups.

The drawbacks of auto-enrolment could result in many not achieving the level of comfort they desire in retirement. Employees could become complacent and start paying less attention to their pension as a whole until they think it’s needed, or relevant.

What does the impact of auto-enrolment mean for you?

Auto-enrolment has reduced active decision-making for some employees when it comes to their pensions. With this in mind, how you communicate pension benefits with your employees could play a significant part in inspiring them to engage with their savings.

Our findings have identified three types of engagement style. We’ve listed these and offered resources to help you build engagement with your workplace scheme.

Engagement styles and suggestions

Our research identified three key types of engagement, which could refine the ways you support your employees with their workplace pensions.

Cognitive engagement

Cognitive engagement is around improving and increasing the awareness and understanding of pension saving and the options available.

• Only 37% of those surveyed know how much their employer contributes to their pension.
• 48% would like more guidance from their employer on how much they should save to achieve their retirement goals.

Clear, regular communications could help your employees understand the role you play in their workplace pension and put pensions to the front of their minds more often. Feel free to signpost our Money Tips hub for everyday money saving ideas, retirement planning and financial wellbeing advice.

Plus, our Retirement Planner tool could also help employees work out how much they’ll need in retirement and how much to save to achieve this. We also have an article based on research sharing insights about how your employees really feel about money, work and pensions, which could help put you in their shoes.

Affective engagement

Affective engagement is around emphasising the importance of longer-term saving.

• 47% worry they won’t have enough money when they retire.
• 84% want to make sure they can keep doing the things they enjoy in retirement.

By increasing interest and motivation in saving for the future, you have the potential to reduce any worries your employees may have.

A way to do this could be to help them clearly visualise what they want their future to look. Our Financial Wellbeing hub has a range of tools and resources to help them do this. This includes our Best life tool – a chance for employees to build their ‘best life’ – as well as financial planning templates and more.

You could also learn about how valuable your role is in your employees’ future and read our article that asks if employees are ‘sleepwalking into retirement’ as a result of auto-enrolment.

Behavioural engagement

Behavioural engagement focuses on employees taking active steps to engage with and stay informed about their pension.

• 24% say that they only check the amount saved in their pension once a year.
• Only 53% actively keep a track of pensions from their previous workplaces.
• 77% of those with multiple pension pots said that it’d be useful to see all pension savings and investments in one place.

There are lots of things you could do to inspire behavioural engagement. As a first step, encourage employees to activate their online pension accounts if they haven’t done so already, and keep their details up to date.

For those who may have lost track of old pensions, the government’s Pension Tracing Service could help.

If they want to consider keeping their pension pots in one place, point them to MoneyHelper’s article on transferring pensions to help them find out if it’s the right choice for them. Check out our article, listing the 5 key questions employees may have about their pension for more information and insight.

Overcoming the barriers to engagement

Breaking the barriers to engagement might rely on a combination of all three engagement styles. Nudges, personalised information, guidance and tools could all help to tackle some of the fundamental challenges.

You have a central part to play in supporting your employees. But remember, there are wider barriers to engagement within society, and a larger collective responsibility needed to overcome them. Read our article on how to engage your employees with their pension for more insight.

Help keep your employees on track for retirement

The implementation of auto-enrolment has helped millions of employees make a start with retirement saving. Employees are feeling more confident and optimistic for retirement – yet ‘going with the flow’ has caused some to be less actively engaged with their savings.

Employees need support from you, the wider industry and the government – to drive engagement and keep their savings on track.

For a more comprehensive overview of our auto-enrolment research and findings, read our whitepaper from 2022, prepared by academics at The University of Edinburgh.