There’s something of a pensions apartheid in this country, particularly between the public and private sectors. It’s not just a DB vs DC thing or unfunded vs funded: for millions of workers it’s a pension vs nothing thing. From about a year’s time, auto-enrolment will start putting those people in a pension scheme for the first time.
However, while auto-enrolment seeks to use the insights of behavioural finance to get people in, some pensions industry people are (presumably unwittingly) using other psychology insights to put people off. Headlines along the lines of “35% to opt out of auto-enrolment” suggest to the target audience that their peers are poised to leave. Our deep-seated nature means that we instinctively feel peer pressure and are inclined to conform. The corollary, a headline saying “65% opt for ‘free money’ towards their retirement”, might be contested by sponsoring employers and pedants but would encourage the opposite response.
In a recent blog post I invited you to ponder pensions inequality and whether it’s going to get better or worse. Auto-enrolment is not perfect and it’s no silver bullet but it is a first step. For millions (35% of workers says one large insurer today) it’s the difference between not enough and nothing at all. Let’s not talk it down!