Data and Research October 26, 2022

Anxiety Among Public Sector Workers Is Growing

New research from MissionSquare Research Institute examines how the current economic conditions have impacted public service employees and how employers can help.

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New research from MissionSquare Research Institute looks into the role that employer-sponsored retirement benefits, retirement readiness, worsening economic conditions and other factors are playing in reducing workers’ anxiety by helping them achieve financial security.

According to the report, “Inflation, Market Volatility, and Retirement: How Employer Benefits Can Help Public Sector Worker Anxiety Over Current Economy,” 84% of public service employees say they are anxious about the impact of economic conditions and market volatility on their personal financial security.

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Current economic conditions and market volatility prompted 81% of respondents to say that they feel worried about whether they will have enough money to live comfortably in retirement, while they will have enough money to last them throughout retirement, 70% said they were worried about having enough in emergency savings right now, while 72% said they worried about being able to retire on time

Nearly half of state and local public service workers are currently saving less than usual for retirement due to high inflation rates over the past year. Of that group, more than one-third said that housing costs (e.g., rent, mortgage payments,) have led to saving less than usual for their retirement, the report says. indicate that high inflation (48%) and rising housing costs (37%) are triggering lower retirement savings. 

While a large majority of all workers report reducing or not changing their savings rates, given housing expenses, non-white respondents were more than twice as likely as their white peers to report that more than usual for retirement due to current housing costs, the report adds.

For the majority of public sector workers, both employer retirement and non-retirement benefits (e.g., health insurance, other insurance benefits, PTO/leave, non-traditional benefits) and other factors make employees more inclined to stay in their job, the report says. Among public employees, 42% believe their employers retirement benefits are better than those offered in the private sector, 11% believe they are worse, and 35% believe they are about the same.

According to the report, the top three actions employers could take to bolster retirement readiness include providing higher wages/salary (86%), better retirement benefits like employer matches (54%) and better healthcare benefits in retirement (48%).

These findings are based upon a national survey of 1,003 state and local government workers conducted by Greenwald Research on behalf of MissionSquare Research Institute in September. The survey polled respondents about financial and retirement security amid current economic conditions.

Benefits October 25, 2022

U.K. Nest Pension Auto Enrollment Remains ‘Robust’

Despite turbulent year, auto-enrollment continues to thrive, with opt outs lower than expected.

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In the decade since its introduction, the U.K.’s pension auto-enrollment system continues to thrive, and fewer workers are opting out than had been expected, according to a report from Nest, the British government’s defined contribution workplace pension. As of the end of March, approximately 17.25 million total enrollments have been made into Nest, a 17% increase from last year.

“There has continued to be impressive growth in the number of member enrollments,” Nest Chief Executive Officer Helen Dean wrote in the foreword to the report. “With the increases to mandatory minimum contributions that took place in 2019 and uncertain labor market conditions since 2020, the auto-enrollment system and the Nest scheme are proving to be robust.”

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According to the report, the rate at which workers have opted out of workplace pensions is much lower than expectations prior to auto enrollment taking effect, with an overall opt-out rate of 8.3% as of the end of March. It also said that opt-out rates decreased by around two percentage points in 2021-2022 compared with 2020-2021.

“The great majority of Nest members have continued to follow the default settings that they’ve been enrolled into,” Matthew Blakstad, director of analysis at Nest Insight, said in a statement. “And, as a result, overall levels of retirement savings have continued to rise throughout these challenging times.”  

Under legislation passed by the U.K. government 10 years ago, employees of a company must be automatically enrolled into a workplace pension plan if they are between 22 years old and the state pension age, and earn an annual salary equivalent to at least £10,000 from their employer. Employers are required to make contributions each pay period into a qualifying workplace pension plan. The program started with larger companies, and then with employers of all sizes participating, as of February 2018.

The level of minimum mandatory contributions was increased in phases. It began with 2% of qualifying earnings, with at least 1% contributed by the employer, and eventually rose to 8% with at least 3% contributed by the employer as of April 2019. Participants are allowed to opt out of auto enrollment after just one month, and can also stop contributions at any time. However, they can’t usually access the money in their pension until they are at least 55 years old.

Other findings from the report include:

  • Contribution levels paid by employers and members remained largely stable, despite the ending of government interventions.
  • Approximately 1 million businesses are now registered with Nest, a 10% increase from last year.
  • Individual pension balances grew 11%, while contributions increased 10% from 2020-2021.
  • The number of participants who made their own additional contributions to their retirement funds rose 36% from the previous 12 months.
  • The total level of additional member contributions made to the plan rose by over 50% compared with the previous year.

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