Just one in 20 think pension contributions are too high

Just one in 20 Nest members think that too much of their income goes into their pension savings, according to new research from Nest Insight.

Nest surveyed its members before and after the April 2018 increase in minimum auto-enrolment contributions to understand how the changes had affected savers.

Over half of its members (51 per cent) didn’t even notice an increase in their pension contributions and 28 per cent said that they thought about increasing their contributions further.

Commenting on the findings, Nest Insight executive director, Will Sandbrook said: “There are extremely positive signs emerging from this research, and indeed there are many reasons to believe the next rise in April 2019 will result in a similarly low impact on cessations and opt-outs.

“Few members think that they’re contributing too much of their income into their pension and indeed over a quarter told us that after the initial increase they thought about increasing contributions further.”

Following the 2018 increase, there was a slight overall increase in saver confidence in being comfortable in retirement, and members over the age of 60 were more likely to consider their pension as their primary source of income in retirement.

Nest also found that there was “no evidence to suggest” that there has been a negative impact on overall debt levels or non-pension saving behaviours.

Sandbrook continued: “Whilst inertia has clearly been harnessed as a powerful force of good, we do need to be mindful of the flipsides. In our surveys, most members told us that they check their payslips, but about half didn’t notice a change in their contribution amount.

“This low level of awareness suggests it’s unlikely that people are questioning whether they’re contributing enough. For those on lower and moderate incomes, who might otherwise expect to rely solely on the state pension, auto-enrolment is likely to provide a very meaningful uplift in their retirement income and quality of life in retirement.

“However, some people may need to take further action to achieve the retirement outcome they’re hoping for. Getting people to engage with retirement outcomes rather than inputs is an important first step.”

Legal & General Investment Management head of DC, Emma Douglas added: “The survey also shows that people are still not engaged enough in saving for their retirement and whilst auto-enrolment is a step in the right direction it will not be enough for the majority of us to secure a comfortable retirement.

“As an industry we need to do more to give pension savers the support they need to achieve the retirement that they want as well as tools to help them work through day-to-day financial pressures, as short-term money worries loom much larger than long-term savings.”

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