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Blog: Why aren’t you saving for retirement?

Retirement fund jarWorkplace pension auto-enrolment launched one year ago and has led to more people saving for retirement. But why are some workers still holding out?

Auto-enrolment requires every employer to place staff aged 22 and over who earn more than £9,440 a year into a workplace pension scheme, if they are not in one already.

However, workers can choose to opt out of this if they want.

Why are people opting out of auto-enrolment?

Some 9 per cent of the 1.4 million people who have been placed into a workplace pension since auto-enrolment started in October 2012 have opted out.

This is far fewer than many pundits expected, says a new report by pension provider NEST.

Of those yet to be enrolled, 61 per cent say they will definitely or probably stay in, up from 47 per cent in 2011.

But let’s look at this in another light: everyone needs to save for their old age.

So why are people opting out of auto-enrolment? What exactly are they planning to live on in their old age?

‘Why I OPTED OUT of my workplace pension scheme’

Adam Davies, 29, from Cardiff, works in marketing. He is one of the 9 per cent to have opted out of auto-enrolment.

"At this point I need all available money for day-to-day living.

"But even if I did have it I’m not sure if I would save into a pension.

"Retirement seems so far away in the future it doesn’t feel like something I need to worry about just yet."

‘Why I OPTED IN to my workplace pension scheme’

Nik Burton on the other hand, a 27-year-old marketing executive in Cardiff, decided to stay in his company pension scheme when he was automatically enrolled in April this year.

He says: "I feel I should have started a pension earlier but never got around to it.

"When I was told I was being automatically enrolled it was an easy decision - they’d done all the legwork for me and I had no reason to opt out.

"It helped that we’d had a seminar at work some months before about pensions, and the importance of paying into one as early as possible really hit home."

Nik adds: "I currently make the minimum contributions through the scheme – but I’m now thinking of increasing these each month as I realise this won’t be enough."

Workers becoming more financially responsible

Pension provider NEST says the lower than expected 9 per cent opt-out rate is down to an increasing sense of financial responsibility among UK workers.

Tim Jones, NEST chief executive, said: "Many households are still feeling the pinch and people are worried about the future.

"But they clearly think tomorrow is worth saving for and automatic enrolment seems to be a welcome helping hand.”

Workers are too lazy to opt out

However, Nick Chater, a professor of behavioural science at Warwick Business School, says the fact many people are choosing to stay in the scheme may be simply because it takes too much effort to opt out.

Default options, says Chater, "are very powerful, for a variety of reasons".

"One is sheer apathy: if it requires attention and effort to opt out of a scheme, many of us will stick with it, either because we don't even consider changing, or it seems too complicated.

"A second is fear of regret and blame: if we stick with the default option and it doesn't work out well, we can blame the government.

"Whereas if we decide to change and that doesn't work out well, then we will blame ourselves.

"A third reason is that we tend to assume, often reasonably, that the default option is right for most people - otherwise it wouldn't have been chosen as the default."

Reasons to start a pension

So how can the hold-outs be convinced that putting money away for their old age is worthwhile?

Tom McPhail, head of pensions research at Hargreaves Lansdown, says the importance of retirement saving has never been greater.

"The basic state pension will provide you with a retirement income of around £7,500 a year in today’s money, sometime in your late sixties.

"For most people this is not going to be enough. There is a compelling logic to the situation: you’ll probably live into your 80s; you’ll probably not want to still be working then.

"You’ll probably need to save some money to provide for your old age when you can’t or don’t want to work.

"The younger you start, the easier it will be. The later you leave it, the less you’ll have in retirement."

Want do you think?

Are you putting money away for your old age? If not, why not?

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Adam Jolley

Adam Jolley

Adam Jolley is a content producer at He joined us in May 2012 from the world of financial services PR. Read more from Adam