On the go: Members of master trust Nest were largely immune to the 2018 rise in minimum auto-enrolment contributions, according to new analysis showing opt-out rates remained stable.
Nest's membership grew by 28 per cent to 8m people representing £5.7bn in assets over the year to March, with some 8 per cent of new members actively choosing to join the scheme.
The report, which evaluates the behaviour of those that engage with Nest, painted a striking picture of the rapid adoption of workplace pensions among employers and employees, many of whom are new to retirement savings.
Fears that the rise in auto-enrolment contributions would put undue financial pressure on some savers have been quelled. Overall opt-out rates remained low at 7 per cent of members, with this figure heavily skewed towards older savers. Many of those who actively chose to participate represent low-income brackets, according to the analysis by Nest and asset manager Vanguard. However, the data does not cover the most recent rate hike, seeing member contributions rise to 5 per cent of pensionable salary.*
Matthew Blakstad, assistant director of Nest Insight, said the dramatic rise in scheme membership following auto-enrolment “represents a huge change to the long-term financial wellbeing of people in the UK".
“That makes it all the more important to monitor and understand the experience of auto-enrolled savers,” he added.
Will Allport, senior retirement strategist at Vanguard, commented: “It is particularly encouraging to see the increase in minimum contributions having such a small impact on member behaviour.”
However, he noted that the trickier task is addressing the gap between male and female retirement wealth. The median balance for females in Nest is £327, is 79% of the £415 earned by the average male, driven by lower average earnings.
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He explained: “We should refocus our attention on the differences in average earnings and working patterns between genders.
“Furthermore, lowering the earnings threshold for AE eligibility, or making contributions on the first pound of earnings rather than adhering to the lower earnings limit, would both help to narrow the disparity.”
*An earlier version of this article failed to specify that the Nest data collection period does not cover the most recent rise in auto-enrolment minimum contributions.
