Joint Institute Pensions Survey 2014

Joint Institute Pensions Survey 2014

Joint Institute Pensions Survey 2014 Executive Summary This year s inaugural Joint Institute Pensions Survey has made a number of notable findings. Key trends include: Just 24% of respondents believe auto-enrolment will deliver on the Pension Commission s goals. Equally eyecatching is the fact that 30% of respondents are undecided on the issue. A majority of those who do not think auto-enrolment will deliver on Pension Commission goals, or are uncertain whether these goals will be met, say that contribution rates should rise: - 38% of that same group advocate a rise in the employer minimum contribution rate to more than 5%; and - 28% say that the employee minimum contribution rate should rise to a level in excess of 6%. te, however, that just as many are against any rise in the employee minimum contribution rate, suggesting a tug of war at the fringes. A total of 57% of all respondents believe that the government should consider compulsion. Some 70% of respondents believe that tax-relief on pension savings needs to be reformed further, with a total of 11% of these saying pensions tax-relief should be scrapped in its entirety, in favour of an increased ISA allowance or matched savings system. The need for greater simplification features as a key theme in the findings, both in respect of tax-reliefs and in bringing about better financial education. 23% of respondents feel auto-enrolment will have had little or no impact on the levels of pension scheme saving by 2020. Some 78% of respondents say that a greater number of people will be entering into flexible retirement arrangements where they are both working and receiving the income from a pension.

Methodology The 2014 Joint Institute Pensions Survey was designed to examine what needs to change in order to deliver good pension outcomes for both employers and their employees. It was distributed by email to the Chartered Institute of Personnel and Development and the Pensions Management Institute, who in turn promoted and distributed it to their respective members. By the closing date of 15 May 2014, the Joint Institute Pensions Survey had been taken by a total of 442 respondents, 326 of whom completed it in its entirety. The following results are derived solely from those 326 respondents and subsequent references to all respondents pertain solely to them. Demographics Respondents job functions 70% 60% 60% 50% 40% 30% 20% 6% 5% 3% 3% 2% 1% 1% 1% 8% 0% Human resources management Management (Senior / Corporate) Administration / Clerical / Reception Consulting Accounting / Finance / Banking N/A - Unemployed / Retired / Homemaker Education Customer Service Operations / Logistics Student Smaller job functions including "Other" Percentage of respondents in the following industry sectors 16% 14% 14% 12% 11% 11% 9% 9% 8% 8% 7% 6% 4% 5% 4% 3% 3% 3% 3% 2% 0%

Location of respondents 40% 38% 35% 30% 25% 23% 22% 20% 15% 14% 12% 5% 0% South London rth Midlands Scotland rthern Ireland Wales 3% 1% Percentage of trustees taking part Trustee n-trustee 90% Human resources management accounts for the vast majority of this year s respondents job functions. When viewed by industry sector, the distribution of respondents becomes a great deal more even. More opinions come from the education and non-profit sectors than any single other. However, the remaining 29 industry sectors account cover a spread of no more than, which gives a diverse range of opinion. 84% of all respondents come from England, and 23% come from London specifically. The results therefore have a strong weighting towards the Capital. A total of of this year s respondents are trustees.

Key Findings The inaugural 2014 Joint Institute Pensions Survey was completed by 326 respondents, 60% of whom list their job function as being in human resources management and 84% of whom come from England. 1). Do you believe auto-enrolment will generally deliver on the Pension Commission's goals of a pension of between 15-18% of earnings for a median earner at the point of retirement? 30% 24% Yes Don't know 46% On balance, respondents think that auto enrolment will not deliver the Pension Commission s target of 15-18% for the median earner on retirement. Those saying no account for 46% of the total, against just 24% who say yes. Thus, for every respondent who believes that auto enrolment will deliver this target, there are almost two who disagree. Interestingly, 30% of respondents return an answer of don t know, which suggests a notable degree of caution in the market s outlook. Of those who said yes to Question 1: 1.1.a. Do you believe that, when added to the new flat-rate state pension, this is a sufficient income for employees to retire on? 14% 55% 31% Yes Don't know The 24% who answer yes to the previous question express significant doubt over whether this is a sufficient income for employees to retire on, when added to the new flat rate state pension. Well over half declare it insufficient, compared to only 31% who feel that it is enough to retire on: a fact that suggests they believe minimum retirement outcomes could be more ambitious.

1.1b. Should the government consider compulsion (i.e. not allowing employees to opt-out from auto-enrolment) to make sure all employees benefit? 3% 36% 61% Yes Don't know 61% of this same group say that the government should consider compulsion, against 36% who oppose such a measure. With only 3% of this group sitting on the fence, the issue of compulsion appears to elicit decisive responses and could therefore be a contentious area. Of those who said no, or don t know to Question 1: 1.2.a. Should the minimum contribution rate for employers increase? 20% Yes - from 3% to more than 5% 38% Yes - from 3% to 5% 30% Yes - from 3% to 4% 11% 0% 5% 15% 20% 25% 30% 35% 40% 45% Of the 46% who answer no or don t know to the previous question on auto enrolment, 79% want the minimum contribution rate for employers to increase compared to 21% who argue against the idea. Over two thirds think that it should be increased to at least 5%, and 38% advocate increasing it further still, suggesting that upward movement would be a popular policy choice. 1.2.b. Should the minimum contribution rate for employees increase? Yes - from 4% to more than 6% 28% 28% Yes - from 4% to 6% 18% Yes - from 4% to 5% 26% 0% 5% 15% 20% 25% 30% Opinion appears to soften in respect of employees, with 28% of the same pool saying no to an increase in the employee minimum contribution rate. However, the remaining 71% still support an increase, and those who argue for an increase to over 6% account are evenly matched with those saying no, suggesting an ideological tug of war at the extremes.

1.2.c. Should the government look at automatically increasing contributions (auto-escalation) for employees over and above the increases already planned? Yes - for all employees 29% 26% 45% Yes - for employees over the age of 40 The same respondents are overwhelmingly in favour of government auto-escalation for the over 40s, with over 7 in 10 answering in the affirmative. Just under half of the same pool would apply auto-escalation to all employees. 1.2.d. Should the government consider compulsion? 16% Yes 28% 56% Don't know The issue of compulsion is moderately less divisive amongst this group than it was amongst those who were optimistic about the achievement of the Pension Commission s 15-18% target. Here, 56% of respondents advocate a policy of compulsion against 28% who oppose the notion. There is a greater degree of fence sitting too, with 16% of these respondents remaining undecided on the issue.

Score Score All respondents: 2). How can employees be better educated on general financial matters? Please rank the top 3 in order of importance for improving member pension outcomes. 800 769 600 435 400 310 237 200 143 0 Start earlier financial education begins in the classroom The financial services industry should take greater responsibility for educating scheme members and the public more generally Government funding should be made available to improve workplace financial literacy It is down to individuals to improve their own financial understanding Employers should run (and pay for) financial literacy classes for staff The most popular strategy by far for improving employees education on financial matters is to start that education earlier. The idea of financial education beginning in the classroom carries more weight than the second and third place strategies combined: namely that the financial services should take greater responsibility for educating scheme members and the public more generally; and that government funding should be made available to improve workplace financial literacy. 22 Other (please state below) 3). What needs to be the main focus of restoring public trust in pensions? Rank the top 3 in order from most to least important. 600 573 490 400 378 257 200 140 44 30 24 0 Strip out the complexity as much as possible Demonstrating value for money Greater transparency around charges Allow greater access and flexibility to the pension at key points in a working life Offer employers greater scope to provide information and (non-regulated) advice More government intervention Less government intervention Other (describe below) Respondents feel that the main focus of restoring public trust in pensions should be to strip out the complexity as much as possible. Following behind in second place is the task of demonstrating value for money and, in third place, the introduction of greater transparency around charges.

4). Does tax-relief on pension savings need to be reformed further to make the system simpler, more affordable and fairer? 11% 19% Yes 70% Don't know 4.1. How should pension savings be reformed further? 50% 44% 40% 30% 27% 20% 11% 7% 11% 0% Tax-relief on all pensions savings should be scrapped and replaced with increased ISA allowance or matching savings system Higher rate tax-relief should be scrapped Pensions tax-relief limit should be reduced further Tax-reliefs should remain broadly the same but should be simplified The amount of money that individuals can take as a tax-free cash lump sum from their pension pot should be phased out or limited Over 70% of respondents recognise a need for the reformation of tax relief on pensions savings so as to make the system simpler, more affordable and fairer. When that same 70% were asked how pensions savings could be reformed further, the most popular response was that tax reliefs should remain broadly the same, but should be simplified. This preference for simplification echoes the findings of the earlier question on restoring trust in pensions. However, many believed more drastic reform should be implemented with 27% believing tax-relief on all pensions saving should be scrapped and replaced with an increased ISA allowance.

5). To what extent do you agree with the statement that by 2020 employees will be much better able to organise their retirement savings than they are now. Don't Know 8% Neutral 13% Strongly agree 5% Partly agree 46% Partly disagree 16% Strongly disagree 12% 0% 20% 30% 40% 50% Respondents are broadly of the opinion that employees will be much better able to organise their retirement savings in 2020 than they are now. 51% of respondents exhibit at least a moderate degree of agreement, though three times as many respondents strongly disagree with the statement as strongly agree with it. 6). To what extent do you think automatic enrolment will have increased levels of pension scheme saving by 2020? 2% 1% t at all 16% 22% Negligible increase Reasonable increase 59% Significant increase Pension saving by employees will have become universal A clearer consensus reigns on the question of whether auto enrolment will have increased levels of pension scheme saving by 2020. Over 97% of respondents predict some sort of increase, with 75% predicting that it will be a reasonable increase at least. At the top end, 16% foresee a significant increase in pension scheme saving.

7.) By 2020 flexible retirement (where more people will be working, perhaps on a parttime basis, as well as receiving income from a pension) will be working for a greater number of people. Don't Know 5% Neutral 4% Strongly agree 28% Partly agree 50% Partly disagree 7% Strongly disagree 6% 0% 20% 30% 40% 50% 60% At least 3 out of every 4 respondents have some expectation of flexible retirement working for a greater number of people by 2020. 28% have a strong expectation of this. Conversely, only 13% of respondents have a pessimistic outlook on the future effect of flexible retirement.