Automatic enrolment has been introduced because only 40% of workers currently have a workplace pension. Immediately after AE was introduced in some bigger companies up to 40% of employees opted out as soon as they got the chance. Our reluctance to put away money for future years is a real problem within the UK and it begs the question: why aren’t we saving for the future? What is it about UK workers which makes them so reluctant to save?
If our lack of saving is so wide spread we could claim that this is a cultural trend. Is it that current psychological attitudes to money just don’t see saving as a priority? According to social scientist Barbara Dafoe Whitehead, our reluctance to save is due to our lax attitude to debt. A lot of people are in debt of some sort whether it be student loans, over drafts or a mortgage to the extent that owing some money is almost the norm. If we don’t recognise having less than zero money (which in some sense is what a debt is) is a problem then we’re not likely to care much about saving. We’ve been taught that if you do run out you can always borrow more, so the impetus to save may not be there. What’s more, when the value of money is fluctuating so frequently and markets are crashing all around us, saving for the future is the last thing on a lot of people’s minds.
One huge factor in the lax attitude to pensions is the current financial climate. A lot of people are struggling to get by or have to make cut backs because of the recession and may feel like they simply cannot afford to put any money away for retirement. The office for National Statistics has found that our household incomes are currently being squeezed more than in previous recessions, forcing people to make cut backs across the board.
Maybe the reason we don’t save is to do with basic ignorance. Pensions are complicated and when you enter into the world of work, unless you’re automatically put onto a pension scheme by your employer, no one tells you what a pension is or what your options are. Even if you are put on a pension scheme it’s quite likely that you won’t really understand the particulars of where your money is going. Automatic Enrolment is meant to simplify the process somewhat, but for those of us who aren’t already putting money away it may feel like a pay cut we just can’t afford.
If we don’t start saving for the future however a lot of us will struggle even more in old age. Indeed, according to an article in the Telegraph 48% of all workers are already planning to carry on working beyond the state pension age and eight in ten of these people are choosing to stay in work because they can’t afford to retire. If we don’t all start saving now, the pension age will become increasingly immaterial.