The UK pension saving experience, by the numbers

Q&A with Matthew Blakstad and Richard Notley, authors of Retirement saving in the UK 2020.

Last week, Nest Insight published its third annual report sharing insights into the saving experiences of people who have been enrolled into Nest. Can you tell us about the aim of these annual reports?

Matthew: The Nest pension scheme is one of the largest master trusts in the world, with over 9.5 million members. That means we have access to a large amount of data. And, just as important, these data are unique. Many of Nest’s members are saving for retirement for the very first time because of auto enrolment, so these data provide a source of insight on a population that’s largely missing from previous research on retirement saving.

This is exactly why Nest Insight was set up. We conduct research to understand the challenges people face in achieving a good income in retirement and test practical solutions that may help them get there. Our ability to analyse these data plays a central role in this. We also believe in sharing our insights as widely as possible with pensions industry experts, policy makers and other researchers so our work has the biggest possible impact, and benefits defined contribution (DC) savers around the globe.

Since 2017 we’ve put out comprehensive annual reports summarising the characteristics and choices of the Nest membership, and of the employers who enrol them, along with supplements exploring specific topics in more depth. Our third annual report, Retirement saving in the UK 2020 (PDF), follows on from the How the UK Saves series, previously produced with Vanguard. Each report has involved tens of billions of data observations and they’ve become a unique resource for researchers wanting to understand this new generation of savers. And, importantly, all of this is done in a way that protects the rights and anonymity of those who rely on Nest to look after their retirement savings.

What are your key takeaways from Retirement saving in the UK 2020?

Richard: If we’d expected the first six months of the crisis to show a complete change in workplace pension saving behaviours, we’d have been surprised. The first big lesson of these times has been to see how the vast majority of people in an auto enrolment system still keep on doing the same thing, even through a period of significant turmoil in the labour market and economy.

There have been discernible changes. During the period between April and September 2020, opt-out rates increased slightly to 11% from the 2019-20 average of 10%, and the longer-term average of 8% since the start of the auto enrolment policy. Yet this change is not nearly as marked as some might have predicted. For the most part, people are acting just as they did before the pandemic. The majority of members have continued to save and there were no significant changes in average contribution levels. As well as demonstrating the power of the default mechanism, this also shows the extent to which government measures, including the Coronavirus Job Retention Scheme, have buffered many workers from the effects of the stark economic downturn.

How has the Covid-19 crisis impacted this work?

Matthew: In ordinary times, we’d have already put out our third annual report, covering the fiscal year 2019-20. But this would have meant pressing pause on our observations as of 31 March last year – a moment in time when the UK’s national lockdown measures had only been in force for a week, and when global investment markets were in a state of turmoil. That’s why we made a choice to extend the period covered by Retirement saving in the UK 2020 (PDF) until the end of September.

The past year, with all its upheavals, has only emphasised the importance of our mission and we’ve learned new ways in which our data can help researchers. Over the coming months, we’ll be expanding the scope of our series of publications to share further analysis of Nest’s ever-expanding data.

So, what’s coming up next?

Richard: With any large population there will be exceptions to the general rule. While we were putting the finishing touches on our latest annual report, we continued to delve into the data to explore whether any specific sub-groups have had a different experience or started to change their behaviour. As we’ve done this, we’ve come to realise that our data have a lot of value to other researchers working to understand how the crisis is affecting the personal finances of UK workers. The real-time flow of data we receive from employers gives us a unique view of changes in the level and frequency of earnings across a large segment of the working population.

This is why we’ll be following our main 2020 report by putting out a series of further analytic findings on how the earnings and savings of different groups of members have been affected by the Covid-19 pandemic. This analysis, carried out as part of a collaboration with Nottingham University and Warwick Business School, is just the first stage in an ongoing programme of research into the impacts of the pandemic.

And, what can we expect from the next annual report, Retirement saving in the UK 2021?

Richard: Looking beyond this, we believe the time is right to apply a greater degree of scrutiny and analysis to a wider range of topics related to Nest and auto enrolment. Future ‘Retirement Saving in the UK’ reports will go beyond straightforward presentation of Nest’s data to focus more on the implications of the emerging trends we’re seeing in Nest members’ savings experiences. We plan to use primary research on members and employers as well as administrative data to expand the analysis and facilitate discussion on the potential implications for the wider auto enrolment policy. Topics we aim to comment on include an assessment of the Nest membership against pre auto enrolment expectations and the proliferation of small pots.

We expect this kind of data-driven insight to play an ever more central role in our publications programme. As ever, we will share our findings as soon as they’re available, and we welcome people to get in touch with any research suggestions or questions they have.

If you have a suggestion or question for our research team, or are interested in collaborating with us on the Retirement saving in the UK research programme, please get in touch: