How does pensions automatic enrolment affect savings?

Today sees the publication of a new report on the effect of automatic enrolment on savings.  The report is led by Professor John Gathergood of the School of Economics, who is principal investigator on the project kindly funded by the Nuffield Foundation and undertaken in conjunction with Nest Insight and the University of Warwick.

Using linked data from the UK’s largest household survey, Understanding Society, with pension records from Nest, the report compares the behaviours of those enrolled into the Nest pension scheme with a representative sample of the working age population and a sub-sample of the working age population observed to be in employment. 

• This analysis has revealed new insights into the savings behaviours of the people enrolled into the Nest pension scheme:
• Pension auto enrolment has been a huge success, getting millions of people, who weren’t already, saving for retirement - in particular, low-and moderate-income workers.
• Our new analysis demonstrates that auto enrolment into pensions has not substantially changed the non-pensions saving behaviours of people enrolled in the Nest scheme.
• Many Nest member households don’t have any other form of savings other than their Nest pot. More than half of Nest enrolees have no non-pension savings (54%).  Only half of members spouses and partners have non-pension savings (50.8%).
• The effect of auto enrolment on this group has been to get them started with long-term savings, while shining a light on the fact that they have no accessible savings to fall back on in the case of financial shocks, like an unexpected bill or an interrupted income.
• The future shape of auto enrolment into pensions needs to be developed through the lens of improving overall financial security.  Emergency savings could help by balancing long- and short-term savings. 

 Nest Insight have produced a blog piece covering the report findings, authored by Matthew Blakstad, Analysis Director at Nest Insight.

Read the report to find out more.