On the go: Auto-enrolment opt-out and cessation rates have remained low over the past year, despite hikes to minimum contributions and the economic impacts of the Covid-19 pandemic, according to new research from Nest Insight.
The report, published on Tuesday, revealed that opt-out rates stood at just 10.1 per cent for the 12 months ending March 31 2021, while cessation rates since the scheme’s inception remained at just 2.3 per cent.
The research, which gathered data on nearly 10m Nest members saving for retirement over the past 10 years, showed that following two years of increases in minimum contribution levels, now at 8 per cent, the master trust is now seeing “significant amounts of money being saved into workplace pensions”.
By the end of March, the average pot size grew to £1,815 for all members and £3,038 for active members, a stark contrast to the previous year, which saw all members with an average pot size of £447 and £1,188 for active members.
However, the report also found that 85 per cent of Nest employers contribute the minimum 3 per cent of qualifying earnings to their workers’ pots, and 89 per cent of Nest members contribute just 5 per cent of qualifying earnings, including tax relief.
Richard Notley, senior analyst at Nest Insight, said: “As we can see by looking at Nest’s membership, many of the workers that have been brought into pension saving through auto-enrolment are younger and lower-paid workers, precisely those who were deemed to be most in need of access.”
However, he warned: “As the new generation of savers continue along their savings journey, it will be essential to understand and address the challenges they may face in achieving a financially secure retirement, and identify and test solutions that may help them get there — from approaches to increase pensions engagement, to tools designed to improve their short-term financial resilience and help them arrive at retirement in an overall financially healthy position.”
The research also showed that the master trust’s bulk transfers service for UK employers, which allows members’ abandoned pots to be automatically transferred to new ones, is “essential” for savers.
Around 35 per cent of all Nest members leave their jobs within any rolling 12-month period, compared with around 16 per cent of all UK workers.
“This transient nature of employment means that workers may only build small pots during each job, but the scheme’s ‘one member, one pot’ design means that, if the employer uses Nest, each time the worker is enrolled their account is matched so they can easily and seamlessly accumulate one pot,” a statement read.
As of March 31 2021, 38 per cent of enrolments were returning members, compared with 30 per cent the year before, and Nest Insight predicts that by March 2026, some 50 per cent of enrolments will be returning members.
