Nest and Sainsbury’s members shrug off LDI crisis

Sainsbury’s director of group pensions Wendy Davis, meanwhile, told Pensions Expert that the crisis did not precipitate enquiries from its scheme members, nor a demand for withdrawals.

Former prime minister Liz Truss’s government announced a ‘mini’ Budget in September that was followed by a sell-off in gilts, and a corresponding jump in gilt yields. This movement triggered collateral calls that pushed some schemes to scramble for liquidity, a rush that saw schemes sell down their gilts.

Those with defined benefit pensions were not directly affected by the crisis. But some savers with DC pots with exposure to gilts will likely have seen volatility in the value of their pot.

The much bigger concern we see in people when we go out and survey them at the moment, is not to do with the stock market. It’s to do with the home balance sheet

Matthew Blakstad, Nest Insight

This did not translate into changes in Nest members’ behaviour, according to Nest Insight analysis director Matthew Blakstad, who spoke to Pensions Expert on November 2, when Nest, Invesco and maslansky + partners jointly launched new research into savers’ engagement with their pensions. 

The research revealed that only 8 per cent of people in their 50s and early 60s have had a call with a free pensions advice service or spoken with a financial adviser.

Engagement levels in big auto-enrolment schemes are low

Almost half of those in their early 50s believe they cannot afford to contribute more into their pension, the study found, while a third are overwhelmed by thinking about their pension.

Nearly a third, meanwhile, are unaware of the steps they can take to better prepare for retirement, and almost a fifth believe that it is too late to make a difference.

The number of savers opting out of their company pension leapt 29 per cent between March and July, according to Penfold, amid concerns about the cost of living crisis.

Members of Nest and the Sainsbury’s scheme, however, do not appear to have increased engagement with their pensions in light of October’s market volatility, despite the threat of diminished pot values.

“We certainly don’t see huge spikes of that sort of behaviour, of people…engaging in the sense of, ‘oh my God, have I lost some money in my pot?’” Blakstad said.

“Engagement levels in a big automatic enrolment scheme like Nest are traditionally quite low anyway, unless we’re going out and prompting people to take action.”

“The much bigger concern we see in people when we go out and survey them at the moment, is not to do with the stock market. It’s to do with the home balance sheet,” he continued. “In that context, what people are thinking about is, ‘can I afford the contribution?’ 

“But even then, the power of defaults is that the small amount that people are contributing to their pension isn’t the thing they’re looking at and saying, ‘shall I change that?’ They’re changing other aspects of their financial life.”

Davis, meanwhile, said that the Sainsbury’s scheme administrators and providers had been consulted to find out if people had been ringing them with enquiries. “They’re not, there [are] no enquiries,” she said.

“What we were more worried about was people taking everything out, because they saw a reduction. But we haven’t seen that happen,” Davis added.

‘Very few feel equipped to pick retirement products’

The research revealed that affordability of pension contributions becomes less of a problem for savers as they get older. While half of those in ‘mid-working life’ feel that they cannot afford to increase their contributions, this steadily declines, with 36 per cent of those aged 61 to 66 sharing this sentiment.

Similarly, while 40 per cent of those in mid-working life are overwhelmed by the idea of their pension, only 22 per cent of savers aged 61 to 66 felt this way.

Uncertainty over what steps to take to better prepare for retirement, however, increase as savers approach the end of their working life. Seventeen per cent of those aged 56 to 60 are unsure on how to improve their retirement prospects, compared with a fifth of those aged 61 to 66.

Forty per cent of those aged 61 to 66 feel that it is too late to make a difference – far above the quarter of savers aged 56 to 60 who feel this way, and just 17 per cent of those in their mid-working life.

“Many people in their later working life are shying away from preparing for retirement, and this isn’t surprising,” Blakstad said. 

“Lots of savers will have built up their pension pots not by taking any action, but by following the default settings of auto-enrolment pension schemes. 

“However, when approaching retirement, people are faced with the need to pick their own retirement products from a complex and evolving marketplace. 

“Very few feel equipped to make such an important decision.”