Axa’s ‘Save More Tomorrow’ aims to boost savings levels

Axa has launched a Save More Tomorrow service that encourages scheme members to agree to increase pensions contributions into its group personal pensions and group stakeholder products.

It has launched the service following research carried out on its behalf that shows 68 per cent of pension plan members think the amount they are saving is too low yet only 14 per cent of those planning to start saving actually do.

It has implemented Save More Tomorrow so that scheme members can agree to future increases when they join a scheme so that premiums grow without any further action or decision making required.

Research from behavioural finance experts Benartzi and Thaler in the US witnessed a 78 per cent adoption rate in one scheme as well as an increase in savings rates from 3.5 per cent to 13.6 per cent in less than four years.

Figures from Axa show that someone on £20,000 at age 20 will accrue a fund of £83,100 by age 40 if they consistently contribute five per cent of income, based on a seven per cent fund growth. If the same individual increases contributions to 8 per cent over three years, their fund will grow to £128,000.

Mark Rowlands, head of corporate partnerships at Axa Corporate Benefits says: “We have carried out extensive research around behavioural finance and were not surprised to find a lack of action and high levels of inertia when it came to planning and investing into a pension.

“People don’t tend to engage with their pension scheme and often forget about it after they’ve made the initial decision to join. Although automatic enrolment has been successful in increasing participation by overcoming inertia it hasn’t addressed the issue of people remaining at the low default savings rate that they initially join the scheme on.

“There are a number of ways we as an industry can improve contribution levels within group pension schemes and they centre round a combination of scheme design coupled with engaging and communicating with the scheme members.

“By automatically increasing contributions, we are helping people to increase their pension pot to deliver a better income in retirement. The real beauty of this enhancement is that the increases can be arranged to coincide with key dates, like pay rises, so that employees don’t feel the pinch of a decrease in income.”