Auto-enrolment pension scheme could create 6m savers

Automatic enrolment into pension schemes could create an extra six million people saving, generating £12.5 billion annually to the retirement pot by 2017, research from Standard Life suggested today.

The Keep on Nudging report, developed with academics from the University of Edinburgh, was based on a survey of more than 600 employees who represented the "squeezed middle", earning £18,000 to £45,000 a year.

Just under half of them (48%) said they would find it easy to save an extra £50 a month if they had to, the report found.

But it also said 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 found retention rates (the proportion of employees not opting out) could be as high as 82% when information is presented "clearly and effectively".

It said: "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 £12.5bn annually by 2017 - fully in line with the DWP (Department for Work and Pensions)'s ambition.

The study found that 26% of employees who have never had any form of pension would choose to opt-out, significantly higher than the 12% who opt-out among employees with some prior or current form of pension saving.

The report said this confirmed the continued need for financial education.

Just over six in 10 who would opt out said it was because they could not afford it - while a third said they did not trust the Government and 28% did not trust pensions.

But there was no significant income difference between those who would opt out and those who would enrol.

The survey found: "Close to 70% of people would not find it difficult to save an additional £50 per month if they had to.

"And 48% admitted they would find it easy.

"To put this into perspective, an additional £50 a month would double the individual pension contributions of someone on an annual salary of £20,000 saving at minimum auto-enrolment levels."

Researchers suggested replacing the term "pension" with "retirement income" when referring to any retirement planning that is not the state pension.

The report said: "There was a perception in our focus groups that pensioners 'spend all day gardening'."

Professor Ed Hopkins of the School of Economics, University of Edinburgh cautioned in the report: "These conclusions are taken from survey data where people were asked hypothetical questions.

"When individuals have to make crucial decisions about their own pensions, they may act differently.

The survey follows a report released last month by the Association of Consulting Actuaries (ACA), which found that only one in four employers had budgeted for the cost when staff are automatically placed into workplace schemes next year.

That study, covering more than 460 employers, found that larger firms expect up to 17% of staff to opt out of workplace pensions after the change next year, rising to 39% in smaller organisations.

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."

PA

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Angel Di Maria is shown the red card
tech
Sport
Roger Federer after his win over Tomas Berdych
sport
Life and Style
News in briefs: big pants in 'Bridget Jones's Diary'
fashionBig knickers are back
Sport
James Milner is set to sign for Liverpool this week despite rival interest from Arsenal
sportReds baulk at Benteke £32.5m release clause
News
The controversial Motor Neurone Disease Association poster, featuring sufferer Michael Smith, has drawn a series of angry complaints
newsThis one has been criticised for its 'threatening tone'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: European Sales Director - Aerospace Cable & Wire

£100000 - £125000 per annum: Recruitment Genius: As a top tier supplier to the...

Recruitment Genius: Digital Project Manager

£17100 - £22900 per annum: Recruitment Genius: One of the North West's leading...

Recruitment Genius: IT Support Technician

£20000 - £22000 per annum: Recruitment Genius: This is an intermediate help de...

Recruitment Genius: CNC Turner

£20000 - £35000 per annum: Recruitment Genius: This long established manufactu...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral