The challenge of moving from inert to engaged

According to the Department for Work and Pensions, about 8m workers have been auto-enrolled into a workplace pension to date. Opt-out rates remain low at about 10 per cent – and even lower among younger savers. Employer awareness remains high, and compliance continues to be reported at well over 90 per cent. These are the statistics of success – but only success in terms of getting people to start saving.

We need to help savers understand pensions are not just about taking part, they are about making the most out of them as possible

What about success in terms of these savers understanding what they are paying into? Or understanding what a suitable income in later life looks like?

Answering these questions, and others around the engagement of savers is, in a lot of ways, a bigger challenge than the ones we have faced so far with auto-enrolment.

At the moment, research shows that many of us in the UK are turned off by the idea of pensions. We think they are too complicated or confusing, and the reality is that day-to-day demands generally take over from thinking about our long-term futures. But that is not the case everywhere. Some countries, like Australia, have a fairly thriving pension saving culture.

So what do we need to do?

The first step was getting nearly everyone in. That is what auto-enrolment is doing. But we also need to help savers understand that pensions are not just about taking part, they are about making the most out of them as possible. The biggest barrier to this, in my view, is the very thing that makes automatic enrolment successful – the inertia principle that underpins it.

It is important that savers know if they are getting value for money, what investment returns they are getting and what the governance of their scheme looks like, because ultimately, these are all contributors towards helping people save an adequate amount for their retirement.

Where is the next frontier?

The next frontier for the industry absolutely has to be technology. Technology has disrupted industry after industry for the better, and as leaders within that industry we need to look at how it can meet our needs.

Year on year, more people engage, transact and communicate online than they ever have before. This has to be the focus of our attention in the future if we are going to break the cycle of inertia.

Better engagement is not a panacea, people will still need to be helped and encouraged to make the right choices. But if we are going to ensure that people have the right level of savings in retirement, it absolutely demands the focus of our attention.

Gavin Perera-Betts is chief customer officer at Nest