A recent research report published by National Employment Savings Trust (NEST) shows that the target market for the yet to be launched auto-enrolment scheme are more likely to make changes to their pension contributions during periods of financial crisis, with many stopping contributions to their pension savings completely during economic slowdown.
The analysis of its sample data revealed 46 percent of the respondents matching NEST’s future target market, made some sort of changes in pension savings as a result of financial crisis.
The research also found that compared to the control group’s 10 percent, 14 percent of NEST’s target group stopped making any contributions during the financial crisis.
Many respondents failed to see that pension savings were unlike investments and fluctuation in the value of pension pots is similar to any savings account. Savers also reacted emotionally due to interim losses suffered including surprise and incredulity, helplessness, anger and disappointment.
The participants’ also wanted to know where the money had gone and who’s to be blamed when there hypothetical pension pots lost value.
“The challenge for Nest is to encourage our members to start saving, continue saving and take appropriate investment risk to support them in building a better income in retirement,” said Mark Fawcett, chief investment officer of NEST while commenting on the findings.
Explaining the rationale behind the research, Fawcett said the research was part of the extensive evidence base developed by NEST that recognise that for a substantial part of NEST’s future members, pensions and investment are new concepts and hence, can be intimidating, while helps the scheme develop future investment solutions.
“When developing Nest’s investment strategy our starting point and our first investment belief is the importance of understanding our members,” Fawcett added.
“We have developed an investment approach that takes account of their attitudes, aspirations and, in some cases, fears,” he claimed.