Changing savings behaviours

People are not saving enough for retirement so how do we help them overcome the barriers to saving. Affordability is a difficult one to tackle but the introduction of auto enrolment in 2012 will create a degree of compulsion. Can we help workers manage their long term financial futures now?

The recession has had an impact on all of us on one way or another. Many feel worse off than they did 5 years ago, whilst others are making
more of a commitment to short and long term savings. In fact, our 2009 Pensions Report research illustrates an increase in the savings index to 54%, up on last year’s level of 51%. This shows a steady increase in the number of men and women saving over the past 3 years. We’re not there yet though. The 54% who are saving are doing enough to achieve an adequate retirement and 1/5th of us are still not saving at all.

What makes people save?

Or what stops them saving? Our workplace research shows that the number one need for workers is access to quality education, guidance and advice to help them make the right decisions about their long term financial management. In fact, 43% of employees expect their employer to facilitate access to general information, while 33% want full financial advice. For many (87%) online access to education and guidance was the preferred route. Workers also wanted to be able to see their savings and manage them online.

Also, workers feel worse off than they did 5 years ago and for some, saving for the short term is the priority. Trust is also more important. The
recession has meant that workers have a lack of trust in the security of savings. Their trust in financial institutions has also fallen due to the financial climate. However, workers do trust their employers and many enjoy access to employer-sponsored pensions and see it as a major incentive to save. The provision of a quality company pension scheme is a key factor for just under half of workers moving jobs and 54% of
employees said their workplace pension scheme was an incentive to stay with their employer. So why are so many still not preparing for retirement?

Attitudes to saving

The lack of confidence in equity markets has seen a trend towards workers seeing other ‘tax-wrappers’ as ‘safe’ products. Over 70% of workers said that Cash ISAs are very or quite safe and 38% saw these as a route to a reasonable standard of living inretirement. This sends a clear signal that workers are looking more widely at how they prepare for retirement and a pension is not seen as the only solution. The important issue is that people use a combination of savings vehicles to achieve their short and long term aspirations. Using only a Cash ISA for retirement planning could be a high risk strategy for those under 30! Helping workers understand how they should go about saving and provide access to quality education and guidance is key.


So it’s sounds easy. Provide access to quality online education and guidance, combined with relevant products that workers can understand and everyone will start saving! Unlikely, but by removing some of the key barriers to saving and helping workers understand simple facts and appreciate the employer benefits being provided could be a starting point. Making sure the education and guidance is appropriate for the audience is vital, as is keeping it simple, with relevant and appropriate language.

Employer concerns

We know employers are concerned about employees not appreciating the benefits being offered and in the current climate are seeing issues relating to workers being stressed by money worries. If employers are enabled to deliver compelling engagement programmes, it will help to deliver their objective to encourage employees to become more involved with their finances. In fact, some employers we have spoken to have advocated allowing workers time in the workplace to manage their finances thus reducing stress and improving productivity.

The Scottish Widows UK Pensions Report 2009
Scottish Widows Workplace Research November 2008
Scottish Widows Communications Research October 2009

Ann Flynn

Head of Marketing Communications,
Corporate Pensions,
Scottish Widows