Retirement saving in the UK - 2021 Member experience from Nest, the National Employment Savings Trust - Nest Insight
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Retirement
saving in the UK
2021
—
Member experience from Nest,
the National Employment Savings Trust
nestinsight.org.uk
Authored by About Nest Insight’s strategic
Richard Notley, Nest Insight, and David partners
Mann, Nest Corporation, London
© 2021 National Employment Savings
Trust Corporation
Invesco is an independent investment
management firm dedicated to delivering
an investment experience that helps people
About Nest Insight get more out of life. Building on its strong
track record in defined contribution
research, and its existing partnership with
the University of Cambridge Judge Business
School, Invesco partnered with Nest Insight
Nest Insight is a collaborative research unit to support its ambitious programme of
set up by Nest Corporation to help research, publications and events. For more
understand and address the challenges information, visit: invesco.co.uk
facing Nest members and other defined
NYSE: IVZ
contribution savers. For more information,
visit: nestinsight.org.uk
BlackRock’s Social Impact team works to
help make prosperity possible for more
and more people around the world.
Through the BlackRock Charitable Trust
and the BlackRock Foundation, the team
supports programmes that bring financial
security within reach of those facing
historic and ongoing barriers to
opportunity. For more information, visit:
blackrock.com/corporate/about-us/
social-impact
Contents
Foreword 5 Chapter 1 Chapter 4
Introduction 16 Members’ working lives 48
Executive summary 6 The ongoing impact of Covid-19 17 Members’ median earnings 49
Who are Nest’s members? 6 Members’ views on the economic downturn 19 Distribution of earnings 50
Members’ working lives 8 A story of continuity 21 Earnings by gender 54
Which employers are using Nest? 9 Types of working 56
Evolution of auto enrolment 9 Chapter 2 Career patterns 59
How much is going into members’ Nest employees and enrolments 22 Persistency of saving 61
pension pots? 11 Growth in employer participation 22
How much is accumulating in members’ pots? 12 Employer characteristics 23 Chapter 5
When and how do members expect to retire? 13 Growth in enrolments 24 Contributions 62
Transfers in and out of Nest 14 Returning members 25 Contribution rates 62
Enrolments by employer size 26 Contribution amounts 66
The UK’s auto enrolment system 15 Manner of enrolment 27 Direct member contributions 69
Workers opting out 28
Workers stopping contributions 32 Chapter 6
Investment and switches 71
Chapter 3 Default fund design and fund options 71
Nest members 34 Switching behaviour 72
Nest’s model 34
Member characteristics 36
Life stages of members 44
Nest Insight | Retirement saving in the UK 2021 3
Contents Chapter 7 Pension pot values 73 Average pot values 73 Distribution of pot values 73 Pot values by member characteristics 75 Pot balances by employer characteristics 75 Small pots 76 Chapter 8 Later life and retirement 77 Age at retirement 77 Working patterns in retirement 79 Working beyond State Pension age 80 Retiring early 81 Nest members’ retirement expectations 82 Chapter 9 Transferring and retiring 85 Transferring funds out of Nest 85 Transferring funds into Nest 88 Retirement and decumulation 89 Chapter 10 Conclusion 91 Nest Insight | Retirement saving in the UK 2021
Foreword
As we discovered through that research, Nest Insight could not do this work without
government interventions such as the the support of generous partners like their
Coronavirus Job Retention Scheme (CJRS) strategic partners, Invesco and BlackRock.
appear to have softened the economic Nest Insight’s programme partners and
impact on employers and prevented many research and delivery partners have also
job losses. These interventions may have stepped up to assist with projects ranging
Helen Dean, CBE been critical in supporting the financial from a trial of a ‘sidecar savings’ tool to
Chief Executive Officer, Nest Corporation wellbeing of individuals whom Nest serves. foster greater financial resiliency among low
One of the key findings of ‘Retirement and moderate earners to research on how
saving in the UK 2020’ was that most of responsible investment messages might be
I take great pleasure in introducing ‘Retirement saving in the UK Nest’s active members have continued to crafted to motivate members to become
save into their Nest pension pot during the more engaged with pension saving. I’d like
2021’, Nest Insight’s fourth annual research report describing the pandemic. Because the government’s to thank all of these partners for their
experience of people saving for their retirement through the support programmes were in place for the dedication to improving pension saving and
Nest pension scheme. entire 2020/21 financial year, the story financial resilience in the UK. There are many
presented here remains largely unchanged more avenues of research to explore as the
from the 2020 research report. auto enrolment generation matures into
long-term pension savers.
So, in Nest Insight’s 2021 report, the context
In this year’s report, Nest Insight presents Of course, a report on Nest members’
of the Covid-19 crisis is acknowledged but Finally, I want to thank the Nest Insight
fascinating evidence about the evolution of pension saving in 2020/21 cannot help but
the focus is on our business as usual. For team for the mammoth research, thought
auto enrolment and Nest’s membership. touch on the impact of the global
those interested in more information on and effort put into the publication of this
Rather than simply presenting analysis of coronavirus pandemic. Because the
how the pandemic has affected Nest’s report for the wider pensions market. We
administrative data from Nest’s most recently economic fallout of lockdowns and
pandemic restrictions was so immediate members and employers, Nest Insight has look forward to hearing your response to
completed financial year ending 31 March,
and striking, Nest Insight chose to extend published a series of excellent blogposts this year’s evidence and presenting more
Nest Insight has made wide use of Nest’s
the reporting period for ‘Retirement saving on its website, nestinsight.org.uk, which I findings on the Nest customer
own bespoke surveys of members as well as
in the UK 2020’, publishing last year’s highly recommend. experience next year.
data from official organisations such as the
Office for National Statistics (ONS). This has research report in February 2021 to include With around one in three workers in the UK
allowed them to paint a much richer portrait data through 30 September 2020. This now having a Nest pot, we appreciate that
of the lived experience of Nest members and allowed them to analyse how employers Nest encompasses a diverse range of
how pension saving is shaped by people’s and members were coping with periods of workers and employers. The research
jobs, employers and careers. It also helps us lockdown and subsequent reopening of shared through publications such as the
to see with great clarity how Nest is serving the UK economy. This has been an ‘Retirement saving in the UK’ series is vital
the low and moderate income workers extremely turbulent time for the employers to understanding the needs, priorities and
targeted by the government’s auto enrolment using Nest as well as Nest’s members. behaviours of UK pension savers, most
reforms and highlights gaps in the overall crucially as they age towards retirement.
pensions market that still need to be closed.
Nest Insight | Retirement saving in the UK 2021 5
Executive summary
This report examines the enrolment, working, saving and Who are Nest’s members?
investment profile of workplace pension savers in the UK
Age
based on data from Nest, the National Employment
It was anticipated that Nest’s membership Based on current population trends and
Savings Trust. With almost 10 million members at the end would skew towards younger workers who internal modelling, however, by 2050 the
of the 2020/21 financial year, Nest is one of the UK’s were far less likely to be already saving in age profile of members is expected to
a workplace pension when auto enrolment become more evenly distributed
largest multi-employer pension schemes. was introduced, with around one third of across age groups.
Nest members expected to be aged 30 or
younger. Nest’s current age distribution
very closely matches this.
Of Nest members...
28% 12%
are 22 to 30 in 2021 are 56 to 65 in 2021
14% 17%
are projected to be are projected to be
22 to 30 in 2035 56 to 65 in 2035
10% 24%
are projected to be are projected to be
22 to 30 in 2050 56 to 65 in 2050
Nest Insight | Retirement saving in the UK 2021 6
Executive summary
Gender Educational qualifications Home ownership
Because of the annual earnings It was expected that workers with higher In surveys many people in the UK say that ownership compared to the generations
threshold for auto enrolment, it was levels of educational attainment were more they expect to use the value of their home which preceded them. This trend data is
expected that more men than women, likely to be already saving in a workplace to help finance some of their cost of living mirrored by the home ownership rates
by a ratio of around 2 to 1, would be pension when auto enrolment was in retirement. However, official statistics among Nest members.
enrolled in Nest. However, the gender introduced, and so Nest members would be show that younger generations have
balance of Nest’s membership has more likely to have no more than A-Levels or increasingly lower levels of home
evolved to be more balanced. GCSEs. However, in surveys many members
report having higher qualifications. Of Nest members under 30... Of Nest members 50 and over...
42% 15%
Rent privately Rent privately
12% 56%
Own with a mortgage Own with a mortgage
or outright or outright
47% 53% 38%
of Nest members of Nest members of Nest members have at least a
are women are men degree-level qualification
0.008% of Nest members did not have a Members with higher qualifications are more
gender listed on their enrolment likely to be inactive, while those with lower
qualifications are more likely to be active.
Nest Insight | Retirement saving in the UK 2021 7
Executive summary
Working status Gender pay gap
Members’ working lives
In surveys the majority of Nest members Across the entire UK labour market,
Nest’s membership was always expected
to have significant numbers of the lower £19.6k report they’re working full-time (30 hours
or more per week), with a clear majority
women earn on average 16% less than
men. A similar but wider gender pay gap
and moderate earners who had working for an employer. exists among Nest members.
traditionally not been served by the Median annual earnings for
existing pensions market. active Nest members as at
Earnings
31 March 2021
22%
In 2011 Nest estimated that median (middle
of the distribution) annual earnings for
individuals then saving into a workplace
£28.2k Gap between women’s median
earnings and men’s median
earnings in Nest’s membership
pension was around £30,600, roughly Median annual earnings for UK
equivalent to being in the top 25% of the eligible employees in 2020
distribution of earnings for all UK workers. The gender pay gap for Nest members
The target group for pension reforms had increases in the mid-30s, after which it
median annual earnings of around The difference in earnings between essentially plateaus.
£19,800, about 35% less. Nest members and UK eligible
14% 26%
employees widens through the
earnings distribution.
15% Gender pay gap
for Nest members
Gender pay gap
for Nest members
30 and younger 31 and older
Gap between earnings of Nest
members in the bottom 10% of
earners compared with the bottom
10% of UK eligible employees
38% 60% 14%
Gap between earnings for of Nest members of Nest members
Nest members in the top 10% of say they work say they work
earners compared with the top full-time for part-time for
10% of UK eligible employees an employer an employer
Nest Insight | Retirement saving in the UK 2021 8
Executive summary
Which employers are using Nest? Evolution of auto enrolment
Volumes Employer size With the staging of employers completed Despite the significant slowdown in
in February 2018 and the second phased economic activity in 2020/21 due to
Continuing growth in employer volumes is Small employers are more likely to increase in contribution rates completed in the pandemic, this increase is not
one demonstration that the government’s enrol most or all of their workers in April 2019, the auto enrolment system has much different from the increase for
interventions to support the economy Nest than larger employers, which been in a steady state for the past two years. 2019/20, the first financial year after
through the pandemic were successful in tend to enrol a portion of staging was completed. This suggests
supporting auto enrolment through the their workforce. that the labour market remained
end of the financial year.
Enrolments
active throughout 2020/21, with
As at 31 March 2021 almost 15 million workers taking or moving jobs and
971k 7 enrolments had been made into Nest. being enrolled, or enrolled again,
in Nest in significant numbers.
Employers registered with Nest
across life of scheme
Mean (average) current
enrolments in Nest from small
15% 22%
employers, with 5 to 49 workers, Increase in Increase in
compared with 12 workers enrolments in enrolments in
11% employed on average by UK
businesses of this size
12 months ending
31 March 2021,
12 months ending
31 March 2020,
Increase from 2019/20 compared with compared with
2020 2019
2,599
Mean current enrolments in Nest
from large employers, with 5,000
or more workers, compared
with 12,924 workers employed
on average by UK businesses
of this size
Nest Insight | Retirement saving in the UK 2021 9
Executive summary
Returning members Nest enrolments that were Who is opting out?
returning members
Because the choice of a workplace Prior to the launch of auto enrolment,
30%
pension scheme is tied to the employer policymakers and researchers
rather than the worker, job churn will estimated that around 25% to 30% of
naturally lead to members workers would opt out of auto
becoming inactive. enrolment in a workplace pension. In
as at 31 March 2018
practice, opt-out rates have been
Nest operates a ‘one member, one-pot’
much lower, with Nest reporting an
model, which means that whenever a
38%
overall opt-out rate of around 8%
worker is enrolled in Nest, the scheme
over the life of the scheme.
checks for a match of identifying
information with an existing account Opt-out rates have varied over time,
and merges the accounts of a worker as at 31 March 2021 however, with a slight uptick in 2020/21.
who has been enrolled in Nest through This increase should be considered
50%
a previous employment. in the context of the final rise in
minimum pension contribution rates
in April 2019 and workers’ financial
predicted around 31 March 2026 concerns during the pandemic.
60% 10.1% 9.9% 10.3%
predicted around 31 March 2036 Opt-out rate for all workers in 12 Opt-out Opt-out
months ending 31 March 2021 rate for women rate for men
Interestingly, across most age Active members are unlikely to stop
groups, opt-out rates for 2020/21 contributions after the opt-out window.
were slightly higher among men than
women. This is a departure from
what we’ve seen in previous years,
where women across all age groups 2.3%
were slightly more likely to opt out.
of Nest members over the life of
the scheme have chosen to stop
contributions while still actively
employed by the employer which
enrolled them
Nest Insight | Retirement saving in the UK 2021 10Executive summary
Contribution amounts Direct contributions
How much is going into members’ pension pots?
There is a high degree of volatility in Nest members have the option to pay
Under the auto enrolment legislation,
contributions as Nest members frequently additional money into their pot via their
a minimum rate of combined
move jobs, or move in and out of periods online account, outside of normal
contributions from the employer and
of contributing to their pot. Members who payroll deductions.
the worker must be paid on the worker’s
had contributions in every month of
qualifying earnings if a worker doesn’t
2020/21 added nearly three times as much,
134k £370m
opt out of, or stop saving into, their
on average, to their pot compared to
pension pot.
members who had contributions in 11 or
fewer months of the year.
Contribution rates Number of Total value of
members over direct member
£1,467 8%
Most employers and members make Small and micro-sized firms tend to
contributions into pension pots at the stick at the minimum rates, whereas life of the scheme contributions
minimum contribution rates – 3% for larger firms are more likely to contribute who have made
employers, with the remaining 5% to more than the minimum. Some Mean value of Increase in mean at least one
reach the total minimum of 8% coming members contribute more too, and it pot contributions contribution direct payment
from members and tax relief. appears they may do so where their for members amounts for into their pot
employer offers a matching scheme.
who contributed 2020/21, compared
continuously in with 2019/20
85% 89% 13% 2020/21
of Nest employers of Nest members of employers contribute more
contribute the contribute 5% than the minimum 3% to their
minimum 3% (including tax workers’ pension pots
of qualifying relief) of qualifying
earnings to their earnings to
workers’ pots their pot
Nest Insight | Retirement saving in the UK 2021 11Executive summary
How much is accumulating in members’ pots?
Nest has been serving employers However, since total minimum Member pot balances by
and workers for 10 years. Nest members’ contribution rates were raised
employer size
pot values are small compared with to 8% in 2019, pot balances for
workplace pension schemes that members who actively and Median pot balances are highest
have been serving the market for regularly contribute to their Nest for members working for employers
much longer. pot are increasing more rapidly. with fewer than 50 employees.
This may be because smaller
employers have higher contribution
Average pot balances Gender pension gap levels on average.
£701 £1,953 15% £2,530
Median pot Median pot Gap between Median pot balance for active
balance for all balance for median pot balance members whose employer has
Nest members as active Nest for women and 5 to 49 workers
at 31 March 2021 members as at median balance
31 March 2021 for men in 2020/21 –
essentially the same
as in 2019/20 £1,379
43% 9% Median pot balance for active
members whose employer has
of Nest members of Nest members 5,000 or more workers
had a pot had a pot
balance of £500 balance of £5,000
or less as at or more as at
31 March 2021 31 March 2021
Nest Insight | Retirement saving in the UK 2021 12Executive summary
When and how do members expect to retire?
The concept of retirement is changing, with people increasingly delaying retirement and
working in retirement, with some seeing it as a positive to continue working for a variety
of reasons, not all of them financial.
Expected retirement age Working patterns in retirement
Many Nest members expect to delay their People often change their working
retirement beyond their State Pension age. patterns in the later years of their
working life, for example, changing
44% 55%
from full-time work to part-time work,
particularly starting around age 55.
of Nest members of Nest members
40 and older
expect to delay
60 and older
expect to delay
26%
retirement retirement
of women 60 and older work
for their employer part-time
Reasons to continue working
40% 24% 12%
of Nest members of Nest members of men 60 and older work for
60 and older 60 and older their employer part-time
say the reason say the reason
they would they would
continue working continue working
in retirement is in retirement
because they is so they
don’t feel ready could pay for
to stop working essential items
Nest Insight | Retirement saving in the UK 2021 13Executive summary
Transfers in and out of Nest
Since April 2017 Nest has enabled members to transfer pension savings to and from other
UK-based registered schemes.
Value of transfers out Timing of transfers out Transfers in
Nest members, like members of any defined Members are, in the main, passive with Nest also allows members to
contribution (DC) pension scheme in the UK, have respect to their pension saving, with transfer in funds from pension pots
the right to transfer the value of their pension many waiting several months between they have at other schemes. This
pot into another qualifying scheme at any time their final contribution to their Nest pot service enables Nest’s members to
and, from age 55, to access their pot as cash. and their request to transfer money out. consolidate their pots, if they so wish.
£1,800 11% 95k
Mean value of of Nest members request to Nest members have transferred
transfers out of transfer out within two months balances in to Nest as at
Nest for 2020/21 of their last contribution 31 March 2021
£3,200 70% 90%
Mean value of of Nest members request to Increase in transfers compared
transfers out transfer out more than six months with 31 March 2020
of Nest among after their last contribution
members
56 and older
£5,200
Mean value of transfers in to
Nest for 2020/21
Nest Insight | Retirement saving in the UK 2021 14The UK’s auto enrolment system
The UK government introduced workplace pensions
auto enrolment in October 2012.
Under the legislation, workers must be Workers can receive tax relief from the
automatically enrolled in a workplace government on their contributions, so that
pension if they earn salary from an a gross contribution of 5% made by the
employer equivalent to £10,000 or more a employee currently involves a net
year, though workers can ask to be contribution of 4% for most people.
enrolled by their employer if they earn less.
Workers can opt out of auto enrolment
Employers may also choose to enrol those
within one month of being enrolled. They
earning less as a worker benefit. Larger
can also stop contributions at any time.
employers were brought into the
However, they can’t usually access the
programme first, with employers of all sizes
money in their pension pot until they
participating by February 2018.
reach age 55.
Employers make mandatory minimum
To learn more, see Essentials of the UK
contributions each pay period into a
retirement system
defined contribution (DC) pension scheme
based on the worker’s eligible earnings,
with the worker making contributions to
reach a mandatory minimum total
contribution. The level of minimum
mandatory contributions was increased in
phases, starting with 2% of qualifying
earnings with at least 1% contributed by the
employer, rising in April 2018 to 5% with at
least 2% contributed by the employer and
rising again in April 2019 to 8% with at least
3% contributed by the employer.
Nest Insight | Retirement saving in the UK 2021 15Chapter 1
Introduction
This is the latest of Nest Insight’s annual reports exploring
data from the Nest workplace pension scheme, one of the
This data allows us to tell
largest pension schemes in the UK by membership. the story of not only how
employers and members
are interacting with the Nest
scheme, but also how Nest sits
With the ‘Retirement saving in the UK’ This year, in addition to analysing Nest Key phrases within the wider landscape of
series we aim to understand the scheme data, we have included auto enrolment and the UK
experience of both workers and employers comparative national data from sources Auto enrolment
labour market.
in the UK’s auto enrolment system for such as the Office for National Statistics All eligible jobholders in the UK
workplace pensions. The series follows on (ONS). We have also drawn on Nest’s own are automatically enrolled by
from two previous reports, published surveys of members and the employers their employer into a workplace
under the ‘How the UK saves’ banner, choosing the scheme for their workers to pension scheme as a default for
which we produced in partnership with better understand savers’ situation,
retirement saving
Vanguard Asset Management. behaviour, attitudes and expectations.
Pension pot
As with the ‘How the UK saves’ Our aim is to provide a more rounded view
publications and ‘Retirement saving in the of pension saving than in previous years’ Retirement savings accumulated
UK 2020’1 , which was published in February reports. This additional data allows us to in a UK defined contribution
2021, in this report we share and analyse tell the story of not only how employers (DC) workplace pension scheme
employer, enrolment and member data and members are interacting with the Nest like Nest
from Nest’s most recent financial year, in scheme, but also how Nest sits within the
this case covering the period from 1 April wider landscape of auto enrolment and Financial year
2020 to 31 March 2021. the UK labour market. Wherever years are mentioned,
Some tables and figures in this report show they refer to Nest’s fiscal year,
only information for the preceding 12 which runs from 1 April to 31 March
months ending 31 March 2021. Others show
cumulative activity since the inception of
auto enrolment in 2012. Still others show
snapshot data at the end of each financial
year to provide a sense for how the auto
enrolment system has matured over time.
1 nestinsight.org.uk/research-projects/retirement-
saving-in-the-uk
Nest Insight | Retirement saving in the UK 2021 16Introduction
Businesses which were unable to trade due
The ongoing to the restrictions were also offered
impact of Covid-19 business rates relief, business interruption
loan support and a one-off ‘restart’ cash
Any analysis of people’s saving in 2020/21 grant to help finance the costs of
must begin by acknowledging that the reopening safely when some restrictions
financial year was dominated by the were lifted. Small businesses could also
global coronavirus pandemic. Restrictions apply for up to £50,000 in immediate
put in place to slow the spread of the virus, finance, with no payments due in the first
including lockdowns, business closures and 12 months, through the Bounce Back Loan
social distancing, led to a sharp decline in Scheme. The government also paid
economic activity, with the UK’s gross statutory sick pay for any employees on
domestic product (GDP) falling 9.9% sick leave due to Covid-19.
between January and December 2020. 2
This was more than twice the fall recorded As we discussed in ‘Retirement saving in
during 2009, at the height of the global the UK 2020’ and Nest Insight’s series of
financial crisis, and the largest fall since the blogs on the pandemic’s impact4 , the
ONS began collecting modern GDP interventions put in place by the
data in 1955. government helped to shore up jobs and
ensured continuity of saving among Nest
To offset the impact of pandemic members. From 1 April 2020 through to
restrictions, the UK government introduced 31 March 2021, Nest’s membership
a range of measures aimed at stabilising volumes and pension contribution
the UK labour market and preventing amounts remained stable.
widespread business failures. For example,
under the Coronavirus Job Retention
Scheme (CJRS), many workers in the UK
were furloughed from their jobs while
receiving at least 80% of their salary, with
the government reimbursing 80% of the
wage bill to employers making claims. At
its peak, on 8 May 2020, businesses made
claims for 8.9 million jobs on furlough. 3
2 Office for National Statistics (ONS), ‘Coronavirus and the impact
on output in the UK economy: December 2020’ (12 February
2021), ons.gov.uk/economy/grossdomesticproductgdp/articles/
coronavirusandtheimpactonoutputintheukeconomy/
december2020
3 HM Revenue & Customs (HMRC), ‘Coronavirus Job
Retention Scheme statistics: March 2021’ (25 March 2021),
gov.uk/government/statistics/coronavirus-job-retention-
scheme-statistics-march-2021/coronavirus-job-retention-
scheme-statistics-march-2021 4 nestinsight.org.uk/impact-of-covid-19-blog-series
Nest Insight | Retirement saving in the UK 2021 17Introduction
Figure 1. Timeline of coronavirus pandemic and government economic support programmes
Number of 4 May 2020 8 May 2020
workers Bounce Back Loan 8.9 million workers’ wages
furloughed Scheme opens are claimed through CJRS Coronavirus Job Retention
– peak number of claims Scheme (CJRS)
12 June 2020 Looking back to 1 March 2020,
Nest member 22 February 2021 8 March 2021 employers can claim for 80%
survey starts
Roadmap announced Schools re-open of wage costs up to £2,500 per
8 million 3 April 2020 (through 23 June) month for each worker put on
for easing lockdown Nest member
Coronavirus Large restrictions in England survey starts furlough. The government also
Business Interruption (through 23 March) pays the employer’s National
Loan Scheme opens
Insurance (NI) contributions and
1 June 2020 2 December 2020 4 December 2020 4 January 2021 3% minimum auto enrolment
National lockdown National lockdown Nest member survey starts Third national lockdown begins pension contributions for
restrictions gradually restrictions lifted (through 15 December) in England 19 March 2021 furloughed workers. Claims must
lifted Restart Grant
6 million 23 March 2020
New national lockdowns begin be made by the 14th day of the
in Northern Ireland and Scotland Scheme launches
First national lockdown month following the payroll
begins in England, 5 November 2020 month. Employers can ‘top up’
Wales, Scotland and Second national wages above 80% at their own
Northern Ireland lockdown begins in expense. Starting in July 2020,
Coronavirus Business 1 July 2020
England under ‘flexible furloughing’
Interruption Loan CJRS introduces
11 March 2020 Scheme opens ‘flexible’ furloughing employers could bring
World Health furloughed workers back to
4 million 11 September 2020 28 February 2021
Organisation work part-time and claim for the
(WHO) Nest member survey starts 38.5 million people in UK have
(through 30 September) received one dose of a
wage costs of hours not worked.
declares
global 8 December 2020 21 December 2020 Covid-19 vaccine and 1.5 million
pandemic First Covid-19 vaccine New national lockdown have received both doses
dose given begins in Wales Sources: HM Revenue & Customs, ‘Coronavirus Job Retention
Scheme statistics’ (July 2021), gov.uk/government/statistics/
coronavirus-job-retention-scheme-statistics-1-july-2021/
18 March 2020 coronavirus-job-retention-scheme-statistics-1-july-2021, Public
2 million Business rates Health England, ‘Vaccinations in the UK’ (July 2021),
holiday for 31 March 2021 coronavirus.data.gov.uk/details/vaccinations, Department for
2020/21 59.1 million people in UK have received one dose of a Business, Energy & Industrial Strategy, Ministry of Housing,
Communities & Local Government, and HM Revenue &
announced Covid-19 vaccine and 8.6 million have received both doses
20 March 2020 Customs, ‘Financial support for business during coronavirus
Coronavirus Job Cumulative claims to CJRS total £57.7 billion (Covid-19)’ (April 2021), gov.uk/government/collections/
financial-support-for-businesses-during-coronavirus-covid-19
Retention Scheme Bounce Back Loan Scheme, Coronavirus Business
(CJRS) launches Interruption Loan Scheme and Coronavirus Large For more information about the UK government’s business loan
Business Interruption Loan Scheme close schemes and other economic support programmes, see
gov.uk/government/collections/financial-support-for-
0 Recovery Loan Scheme opens businesses-during-coronavirus-covid-19
Nest Insight | Retirement saving in the UK 2021 18Introduction
furloughed. This might reflect some non-essential The significant impact of the CJRS on the financial
Members’ views on the businesses bringing workers back into part-time or wellbeing of Nest’s membership is perhaps most evident in
economic downturn full-time work as they prepared to reopen in April 2021 as the stable proportion of members reporting that they were
part of the government’s roadmap to easing restrictions. currently unemployed at the time of each survey. In both
While we have seen minimal impact on pension June 2020 and March 2021, 6% of members said they
contributions during the pandemic, Nest’s surveys of Among Nest members, there was little difference in the
were unemployed.
members over the past year indicate that the Covid-19 proportion of men and women who reported being
crisis has indeed affected people’s finances. 5 It’s important furloughed by their employer. However, age does appear Of course, people’s employment status is only one aspect
to keep in mind, however, that member surveys only to have been a factor. In June 2020 one quarter of of their financial wellbeing. In 2020/21 Nest also surveyed
provide information at the snapshot in time during which members aged under 30 said they were furloughed, and members about how they felt the pandemic was affecting
they were conducted. Given the evolving nature of the in March 2021 these younger workers continued to be their finances. The June 2020 survey asked members about
pandemic and vaccination campaigns, as well as slightly more likely to be furloughed than members aged their expectations for the future while subsequent surveys
uncertainties about the length of time it will take for the 30 or older. In addition, high-earning members were also asked how the pandemic was already
economy to fully recover, the survey data presented in this substantially less likely than low-earning members to be impacting them.
report offer limited insights into the longer-term financial furloughed. In June 2020, 8% of those earning £40,000 or
impact of the pandemic on members. more annually were furloughed, compared with 19% of
those earning less than £20,000 per year.
As can be seen in Figure 2, the proportion of Nest
members reporting that they had been furloughed varied
over the course of the year, mirroring different phases of Figure 2. Nest members who reported being furloughed
restrictions and the overall claims made to the CJRS.
24%
In the June 2020 survey, conducted shortly after the first
national lockdown of England was lifted, close to one fifth
(17%) of Nest members said they were then currently
furloughed. By September 2020, after a summer largely 18%
free of lockdown restrictions, this figure had dropped 17%
16%
substantially, to 4%. In December 2020, near the end of the 15%
14% 14%
second national lockdown of England and extensive 13% 13% 13%
restrictions in other parts of the UK, it had risen again, with
11% 11%
14% of members saying they were then furloughed. A third 10%
national lockdown began in January 2021, with a phased
easing of restrictions from 8 March 2021 into summer 2021. 7% 7%
Finally, in the most recent survey at the time of publication, 5%
conducted in March 2021, 10% of members said they were 4% 4% 4%
3%
June 2020 September 2020 December 2020 March 2021
5 In 2020/21 Nest surveyed members quarterly, including the larger annual survey in
December, with surveys in field 12 to 23 June 2020 (1,737 total respondents), 11 to 30
September 2020 (1,434 respondents), 4 to 15 December 2020 (7,116 respondents) Total Under 30 30 to 39 40 to 49 50 and older
and 8 to 23 March 2021 (2,297 respondents). Unless otherwise noted, all survey
data reported in this report are from these member surveys. Source: Nest member surveys, 2020/21, all respondents. Question: Which of the following best describes your employment status?
Nest Insight | Retirement saving in the UK 2021 19Introduction
In June 2020 almost one quarter (23%) of members said By March 2021 there had been a slight reduction in the The proportion of members reporting that the pandemic
they believed the pandemic would have a significant proportion of members thinking the pandemic would have was already having a negative impact on their finances
long-term impact on their finances. Another quarter (24%) either a significant long-term or a significant temporary peaked in December 2020 at almost half (47%), as shown
believed the impact would be significant but temporary. negative impact, with 47% of members believing this in in Figure 4 (next page). In contrast, in Nest’s last member
As one might expect, those who were currently furloughed June 2020, compared with 41% in March 2021 (Figure 3). survey of the financial year, conducted in March 2021, 37%
or unemployed were more likely to believe the pandemic of members said the pandemic was having a negative
would have a significant long-term impact – 38% of those impact on them.
furloughed and 51% of those unemployed said this.
Throughout the year, however, some members reported
that the pandemic was having either no financial impact
Figure 3. Nest members’ views on how the pandemic will affect their personal finances in the future on them or was actually making them better off financially.
By March 2021, just over one quarter (27%) said they’d
28% experienced a positive impact on their finances, up from
27%
26% 26% one fifth on average in surveys conducted earlier
25% 25% in the year.
24%
23% 23%
Perhaps unsurprisingly, members’ responses to this question
20% 20% were correlated with their income. Those earning £40,000 or
19% more per year were significantly more likely to say the
17% pandemic was having a positive impact on their finances
16% 16% (36%) compared with those earning less than £20,000, who
15%
14% 14% were more likely to say it was having a negative impact (41%).
Yet, even among lower earners, around one fifth felt the
11% 11% pandemic was having a positive impact on their finances.
Although we haven’t yet observed any significant change
in Nest’s membership or contribution volumes during the
pandemic, this survey data suggests that the scheme’s
members have felt the sharp reduction in economic
activity in 2020/21.
Significant numbers of Nest members have been furloughed.
June 2020 September 2020 December 2020 March 2021 Younger members have been disproportionately affected.
Many have felt a financial impact, with more feeling a
It will affect my finances It will affect my finances It will affect my It won’t impact Don’t know negative impact than a positive one. What this will mean in
a great deal over a a great deal but only finances a little. my finances. the longer term remains to be seen. However, Nest’s survey
long period of time. temporarily.
data suggests that around one quarter of the scheme’s
Source: Nest member surveys, 2020/21, all respondents. Question: And looking ahead, how do you feel the Covid-19 outbreak will affect your personal finances, if at all? membership expect a long-term negative impact on their
finances as a consequence of the pandemic.
Nest Insight | Retirement saving in the UK 2021 20Introduction
Figure 4. Nest members’ views on how the pandemic was currently affecting their personal finances
A story of continuity
For ‘Retirement saving in the UK 2020’ we Nest’s scheme and survey data
27% extended our reporting period to include suggest that auto enrolment
data from 1 April 2020 through to 30
24%
September 2020 in order to consider
will help to improve many
22%
21% preliminary findings about the pandemic’s people’s retirement outcomes
20% 20%
19% 19% impact on pension saving. Here we over the long term.
18% consider full-year evidence for 2020/21.
15% 15% 15% Despite the uncertainties and concerns
14%
expressed by Nest members in surveys,
12%
11% pension saving has continued. In the final
10%
9% six months of the financial year, very little
8% changed in the government’s policies for
mitigating the impact of the pandemic
and Nest members continued to save as
they had before. For these reasons, we
have not elaborated further in this
September 2020 December 2020 March 2021
report on the effect of the pandemic
or the economic downturn on Nest’s
It has had a significant It had a limited It has had no impact. employers and members except where
positive impact. negative impact.
it is especially pertinent.
It has had a limited It has had a significant Don’t know
positive impact. negative impact. Instead, in ‘Retirement saving in the UK
in order): 2021’, we’ve taken the opportunity to
Source: Nest member surveys, 2020/21, all respondents. Question: And looking ahead, how do you feel the Covid-19 outbreak will paint a fuller portrait of Nest’s
affect your personal finances, if at all? Numbers may not total 100% due to rounding. membership and reflect on the success of
the UK’s auto enrolment system in
creating a new generation of pension
savers who appear to continue to save in
the face of short-term financial shocks.
The contribution profiles and member
behaviour in evidence in Nest’s scheme
and survey data suggest that auto
enrolment will help to improve many
people’s pension saving and retirement
outcomes over the long term.
Nest Insight | Retirement saving in the UK 2021 21Chapter 2
Nest employees and enrolments
Nest was created so that every employer in the UK, whether Those large firms which did choose Nest as
their pension provider during the early years
large or small, had access to a workplace pension scheme of auto enrolment often did not enrol all of
that could be used to fulfil their auto enrolment duties. their workers in Nest. This was in part due to
restrictions placed on the total volume of
annual contributions that could be paid into
Nest members’ pots. These restrictions had
been stipulated in the legislation creating
Nest to prevent Nest from gaining a
It was considered essential that a pension competitive advantage in the pensions Key phrases
provider with a public service obligation Growth in employer market. As a consequence, larger employers
Large employers
was available from the first moment that participation with high-earning individuals on a more
large employers, and the significant generous pension arrangement were unable 250 or more employees
volume of new pension savers employed When auto enrolment was introduced, to use Nest for their entire workforce.
by them, began to be brought into the every UK employer which was operating in Medium-sized employers
April 2012 was allocated a date between Removal of the restrictions on Nest’s
system in October 2012. 6 And hundreds of 50 to 249 employees
October 2012 and February 2018 by which annual member contribution limit was
thousands of workers have been enrolled
they were required to fulfil their duties to approved by the government in 2014, with Small and micro employers
in Nest by large employers. Yet as at 31
enrol their workers in a pension scheme. the restrictions fully lifted in April 2017,
March 2021, the overwhelmingly majority 1 to 49 employees
Larger employers were brought into the when small and micro employers were
of employers using Nest were small or
system first, with medium-sized and then being brought into the auto enrolment
micro-sized, with fewer than 50 workers.
small and micro employers following them. system. These smaller employers were far
This process of bringing employers into the less likely to have an existing pension
auto enrolment system was called ‘staging’. provision for their workers and most, it was
believed, would be seeking a scheme for
Due to this staged approach, the number all their workers.
of employers using Nest was initially low.
This was largely in line with expectations, An estimated 98% of UK employers are
The overwhelming majority since many larger corporations already small or micro-sized.7 So it’s not surprising
had a workplace pension scheme in place that from January 2016, when smaller firms
of employers using Nest are began to be staged into auto enrolment,
for at least some of their workers. To fulfil
small or micro-sized. auto enrolment duties, it was deemed the volume of employers using Nest
more likely that these large employers quadrupled within the year.
would open up their existing scheme to all
their workers, who were now required to
be automatically enrolled in a pension. 7 ONS, ‘Employers enterprises by size and broad industry’ (9
April 2021), ons.gov.uk/businessindustryandtrade/business/
6 Nest Insight, ‘Pension reforms in the UK: 1997 to 2015’ (2020), activitysizeandlocation/adhocs/13112employersenterprises
nestinsight.org.uk/uk-pension-reforms bysizeandbroadindustry
Nest Insight | Retirement saving in the UK 2021 22Nest employees and enrolments
in order):
Figure 5. Employers registered with Nest, year by year Nest does have a slight under-
Employer characteristics representation of medium-sized
When employers register with Nest, they’re employers, possibly as a result of these
104k employers being more likely to use one
asked to provide information about the
80k size of their payroll. However, Nest does scheme for all of their workers compared
867k
not require that employers update this to large employers, which may combine
47k 791k Nest with legacy arrangements provided
data. So, although we expect that
19k 713k to some of their workers before the
employers will grow and employ more
workers over time, the employer size data introduction of auto enrolment.
613k
available to us reflects snapshots taken at
many different points in time, from when
6k
each employer joined Nest.
326k Setting aside these data limitations, it
appears that the distribution by size of
employers using Nest broadly mirrors the
1k distribution seen across the entirety of the
5k 14k 85k UK labour market, as seen in Table 1.
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Table 1. Size of employers using Nest as at 31 March 2021
Active employers Inactive employers
Employer size Nest employers All UK employers
1 to 49 employees 98.2% 97.8%
Growth in employer volumes has continued have had the desired effect of preventing
since then, but at a slower pace, with mass business closures. In fact, the number 50 to 249 employees 1.46% 1.73%
around 971,000 employers having of employers newly setting up to use Nest
registered with Nest at some point by as their pension provider increased 250 to 499 employees 0.14% 0.21%
31 March 2021 (Figure 5). This total during 2020/21.
represented an 11% increase over the 500 to 999 employees 0.08% 0.11%
In addition, the proportion of businesses
2020/21 financial year. Of these, around 1,000 to 4,999 employees 0.08% 0.09%
becoming inactive – for example, because
867,000 employers had an active Nest
they ceased operating, became insolvent
account as at 31 March 2021. This is notable 5,000 or more employees 0.04% 0.03%
or decided to switch to a different pension
in the context of the pandemic. As noted in
provider – was actually much lower than
the introduction and reported in detail in Source: Nest Corporation and ONS, ‘Employers enterprises by size and broad industry’ (April 2021), ons.gov.uk/
one might expect in such a challenging businessindustryandtrade/business/activitysizeandlocation/adhocs/13112employersenterprisesbysizeandbroadindustry. ONS data
‘Retirement saving in the UK 2020’8 , it is as at March 2020. Numbers may not total 100% due to rounding.
business environment. The number of
appears that the interventions made by
inactive employers grew by only 30% over
the government to secure the economy
2020/21, compared with 70% over 2019/20.
8 nestinsight.org.uk/research-projects/retirement-
saving-in-the-uk
Nest Insight | Retirement saving in the UK 2021 23Nest employees and enrolments
The proportion of enrolments that are
Growth in enrolments currently active has plateaued since the
The number of enrolments in the Nest end of the staging period. As at 31 March
scheme naturally increased as employers 2018, soon after the end of the staging
were staged into the auto enrolment period in February of that year, Nest had
system. But unlike with the number of around 3.9 million current enrolments.9 As
employers using Nest, there was no striking at 31 March 2021 Nest’s current enrolments
acceleration in enrolment volumes at any had only risen to around 4.5 million. Over
point between October 2012 and February the same period the number of previous
2018. The staged approach resulted in enrolments rose from 3.8 million to just Key phrases
enrolment volumes being much more over 9 million individual events.
Current enrolments Exiters
evenly distributed, as Figure 6 (next As workers change employers over the
page) shows. Employed workers who have Workers enrolled in Nest whose
course of their lives, there is an increasing
chance that they will at some point be been enrolled in Nest by their account has been closed. This
As at 31 March 2021 almost 15 million current employer, or who are may happen either because they
enrolments had been made into Nest, an enrolled in Nest. We expect the growth in
previous enrolments to exceed that of self-employed and have enrolled have retired and taken a lump
increase of around 15% compared with 31
current enrolments in the coming years. themselves in Nest. Workers sum or cash payment or series of
March 2020. Despite the significant
slowdown in economic activity due to the may be enrolled in Nest multiple payments until their pot balance is
pandemic, this increase is not much times through subsequent or zero, transferred their money out of
different from the increase between 31 simultaneous employments. Nest into another pension scheme
March 2019 and 31 March 2020, the first or died and their pot has been
Previous enrolments
financial year after staging was claimed by a beneficiary.
completed. Then, enrolments increased by Workers enrolled in Nest who
around 22%. This suggests that the labour have not retired, died or opted Opt-outs
market remained active throughout out but have either chosen to stop Workers enrolled in Nest who
2020/21, with workers taking or moving contributing to their Nest pension choose, within one calendar
jobs and being enrolled, or enrolled again, pot, left their employer using Nest month of their enrolment, not to
in Nest in significant numbers. or been moved to another pension make contributions into their Nest
provider by their employer while pension pot.
leaving their legacy pot at Nest.
Workers enrolled in Nest more
than once are counted for each
enrolment they’ve had.
9 Current enrolment counts are approximately equal to
active member counts but members active in more than one
job at the same time will be counted more than once in the
current enrolment total.
Nest Insight | Retirement saving in the UK 2021 24Nest employees and enrolments
Figure 6. Status of cumulative enrolments in Nest, year by year Over time we expect the proportion of
Returning members returning members being enrolled each
Nest operates a ‘one member, one pot’ month to continue to grow, with around
14.8m model, which means that whenever a half of all enrolments in 2025/26 predicted
worker is enrolled in Nest, the scheme to be of returning members. By 2035/36
12.9m
checks whether their identifying information this proportion is expected to be
matches an existing account and merges approaching 60%, the level where we
the accounts of any worker who has been estimate a natural plateau will emerge.
10.6m
enrolled in Nest through a prior employment. This analysis only includes information on
8.3m Figure 7 shows that the proportion of matched returners where a match can be made with a
enrolments has increased over time. As at 31 Nest account. It does not include individuals
March 2018, around the end of the staging who opt out of Nest each time they’re
5.6m period, about 30% of enrolments in Nest enrolled. We therefore presume that the
were returning members. As at 31 March number of enrolments made each month
3.6m 2021 this proportion had increased to 38%. where the individual is being re-enrolled in
Nest is higher than this data suggests.
2.3m
1.1m
Figure 7. Percentage of enrolments where the worker already has a Nest account
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 80%
70%
Enrolment events
Current Previous Opted out Exited
60%
50%
40%
30%
20%
10%
0%
2013 2018 2023 2028 2033 2038 2043 2048 2053 2058
Actual Forecast
Nest Insight | Retirement saving in the UK 2021 25Nest employees and enrolments
Some employers, particularly large Among micro firms employing four or Of course, the volume of current enrolments
Enrolments by employer size businesses employing 1,000 or more fewer workers, there is very little difference in Nest over the life of the scheme to date
We have shown that Nest is used by workers, may have initially used Nest for between the initial worker enrolments also does not include any workers who
employers of all sizes in a very similar only a subset of employees, as described made into Nest and the mean number of have opted out of their workplace pension.
distribution as is seen in the overall UK on page 22. Table 2 shows the mean workers at UK employers of this size. We But opt-outs alone cannot explain the gap
labour market (see Table 1 on page 23). number of enrolments by employer size for deduce from this that micro employers are even among small and medium-sized
However, it is known that for some larger two points in time: the first month during more likely to adopt Nest as the scheme employers, where current enrolments stand
employers Nest will not be the only which the employer started to enrol for their entire workforce. This is not at around 54% to 58% of the ONS’s mean
pension scheme that they operate. workers in Nest and current enrolments surprising as employers of this size may employment figures.
across 2020/21. We compare these initial have just one individual responsible for the
To more fully understand the employers It appears that across all UK firms other than
and current enrolment metrics for administration of their business operations,
which Nest serves we consider the the very smallest, Nest is only one part of an
employers against the most recently including enrolling workers into a pension.
number of enrolments that employers employer’s workplace pension offering.
available mean number of workers Simplicity in administration may be a
have made into Nest relative to their employed by UK businesses reporting the significant factor for them. The fact that the mean number of current
reported number of workers. same overall number of workers. enrolments over the life of the scheme is
Among employers with five or more
larger than initial enrolments for all firms,
workers, however, current mean
regardless of size, may indicate
enrolments are lower than the mean
Table 2. Mean enrolments by employer size employer growth. Some of the very
number of workers employed at UK
largest employers using Nest have been
businesses of the same size. Partly this may
Employer size Mean initial Mean current Mean number using the scheme since they were first
be due to differences in the populations
enrolments in enrolments in of workers staged into auto enrolment in 2012/13.
being compared. The Office for National
Nest* Nest* employed by Alternatively, this difference may be due to
Statistics (ONS) analysis of employer size
UK businesses a change in how employers use Nest to
includes all workers employed by the
fulfil their obligations under auto
1 to 49 employees 6 7 12 business, not just those workers who are
enrolment. Some employers using the
eligible for auto enrolment. Evidence from
50 to 249 employees 41 56 99 scheme may have increased the
the Labour Force Survey, a representative
proportion of their workers enrolled in
sample of households across the UK,
250 to 499 employees 105 189 345 Nest as their default workplace pension.
suggests that approximately 82% of all UK
500 to 999 employees 167 369 689 employees are eligible for
auto enrolment.10
1,000 to 4,999 employees 312 746 2,117
5,000 or more employees 679 2,599 12,924
* Mean initial enrolments are calculated from all enrolments made in the first three months following each employer’s staging date.
Mean current enrolments in Nest are as at 31 March 2021. Mean number of workers employed are as at March 2020, the most recent
March data available.
Source: Nest Corporation and ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/adhocs/13112employersenter
prisesbysizeandbroadindustry
10 Nest Insight analysis of Labour Force Survey, January
to March 2021
Nest Insight | Retirement saving in the UK 2021 26You can also read
