Pensions jump up list of priorities

Romsey Advertiser: Research has revealed saving for retirement is in third place in consumers' priorities Research has revealed saving for retirement is in third place in consumers' priorities

Pension saving has jumped up people's lists of financial priorities since the Government's landmark scheme to encourage people to put more money away for retirement was launched, a report has found.

Saving for retirement is now in third place in consumers' priorities, with holidays in first place and saving for a "rainy day" coming second, according to not-for-profit pension scheme Nest.

When similar research was carried out in 2011, pension saving came in seventh place, with saving for holidays again in first place, home improvements in second place and socialising coming third.

Sitting in sixth place on the priority list in 2011, saving for shoes and clothes was a bigger priority for consumers at that time than retirement saving. Saving for a rainy day was in fourth place in 2011, with saving for a car in fifth position.

More than 2.5 million people have been placed into workplace pensions since the Government's automatic enrolment scheme was launched in autumn 2012 to head off a retirement savings crisis as people live for longer.

So far, a higher-than-expected rate of nine in 10 people are staying in their workplace pension rather than opting out and Nest said that consumers have given auto-enrolment a "quiet welcome".

But the report also found that just one in 11 (9%) people think their current and future savings will be enough to provide for them in retirement, down from one in seven (14%) in 2011.

Only half (48%) of those surveyed could give a specific prediction about how much money they will need to live on in retirement.

Workers generally estimated they would need around half their current salary in retirement, meaning they typically aspire to have £14,156 a year to live on.

But people's understanding of pensions and how they work remains "low", the report said. Only one fifth of people said they know anything about pensions "in any detail".

One in eight (12%) of people said they knew nothing about pensions at all.

Nest's director of communications Graham Vidler said: "The good news is that workplace pension reforms have come at the right time to help people get on the savings ladder and put something in place for their retirement.

"But it's clear that many are worried about what they'll live on and don't feel they're doing enough."

Auto-enrolment started with the larger firms, which tend to have the most experience of pensions and communicating their benefits to employees.

Around 30,000 companies are due to automatically enrol their staff into a pension in 2014.

But the Nest report found that many employers found that it took longer than they expected to get ready.

One-fifth (20%) of those employers which have been brought into the initiative took over 16 months to get ready, despite previously offering a pension scheme to at least some of their workers.

Meanwhile, two-thirds (63%) of employers found it more difficult than they had anticipated and 55% reported having difficulty understanding the legalities of the reforms.

The report said that while general awareness of auto-enrolment is high among medium-sized employers, they tend to be more "hazy" on the details of what they will need to do.

It said one "common misconception" was that once an employer had chosen a pension provider, everything else would be done for them.

The Government has told firms that they should allow around a year to prepare for auto-enrolment.

It has been considering placing a cap on management charges for pension schemes but confirmed last week that any cap will not be in place for at least a year, in order t o give firms more time to adjust.

Pensions minister Steve Webb said in a written ministerial statement that the Government remains "strongly minded" to cap pension scheme charges, but any cap will not be introduced before April 2015.

Nest chief executive Tim Jones said that as auto-enrolment rolls out, this year will be "tough".

He said: " Many employers who have now completed their implementation encountered unexpected challenges along the way, and were surprised at how long it took.

"If acted upon, these lessons learned can be hugely beneficial to automatic enrolment pension providers as we begin to help the larger volumes of employers meeting their staging date this year.

"These employers have fewer resources and less knowledge of pensions than the larger employers who have staged up to now."

Pensions Minister Steve Webb said: " Automatic enrolment so far has been a stunning success. Over 2.5 million people have been enrolled and nine out of 10 are now building up a pension, many for the first time.

"This report shows that people are making it a priority to save for retirement and, as we move to smaller firms, we need to make sure that this success story continues."

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