PLSA AC 2020: Evidence of increase in employers cutting pension contributions - Nest

Data from the first week of October indicates that there has been an increase in employers cutting pension contributions, according to Nest customer engagement director, Mark Rowlands.

Speaking at the PLSA Annual Conference 2020, Rowlands commented that the Job Retention Scheme had had a “very significant buffering effect”, meaning that we have yet to witness “the full consequences” for employer contributions.

However, he also pointed out that contribution schedules from both employers and members had remained relatively stable over the period from March to August and beyond, stating that Nest had “not seen any significant changes in employer behaviour” during this time.

He also highlighted that Nest seen a “very significant reduction in individual leavers, who are voluntarily leaving employment, and new enrolment”, suggesting that “one of the consequences of the pandemic has been to significantly reduce job turnover”.

However, the number of employees paying into their pensions was shown to have slid a little during the period, as data revealed that scheme opt-out rates stood at 12 per cent between March and August, which Rowlands stated was higher than the usual nine to 10 per cent.

Rowlands explained that pensions may not be a top priority for many people right now.

He stated: “The reality is that, for some people, paying back debt is their first priority and we know that a lot of people are having to borrow to make ends meet right now. This situation will probably get worse for those who are on long-term furlough.”

He referenced Nest research which found that, during the pandemic, 4.2 million people have had to borrow to make ends meet, with 980,000 of them having turned to high-cost credit products.

Separate research from Standard Life published in September, showed that, in May 2020, 11 per cent of households were in serious financial difficulty and 17 per cent said they were struggling to make ends meet.

Rowlands pointed out that the Nest Insight research body has been working to develop a solution dubbed Jars, which seeks to combine emergency saving and retirement saving.

The solution, which is in the early stages of live trials, could be offered as a benefit by employers to be taken voluntarily by workers, and allows savers to set their own savings amounts and targets.

“This is one test we are doing to see how we can build up that emergency buffer so that people can survive a financial shock. It gives them short term security as well as giving them the ability to save for their long-term future," he stated

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