PI Partnership – Legal & General Investment Management PI Partnership


For instance, one 21-year-old man changed his view about pay- ing into a scheme after a moderator told him that his pension would not just be from money deducted from his salary. He shifted from saying: “It’s not something I’m too intrigued by or too involved in. I just know some money that I get paid gets deducted and put toward the pension. That’s not something I would see until obviously I get old …”, to commenting: “If I put in and the employer puts in, that’s fair. I might not opt out as soon as I hear about it, you know, so I might keep it running for a while.” And it is not just awareness of rules around auto-enrolment that might make a difference to retirement saving behaviour; it seems that there’s considerable confusion around pensions in general. As one of our female interviewees aged 30 put it: “You leave school and you’re literally thrown into the world to do what you want. And, you know, for the first few years of your working life you are literally earning money and spending it. And actually, you know, we should be more educated on things…like pensions and savings and investments”. More than half of younger workers (54%) believe that the amount they could be saving would be so low that it would not be worth it. This indicates to us that there’s still a long way to go to ensure that people understand the mathematical basics of pensions, such as how compound interest works so that even small amounts can add up significantly over time, the importance of starting contributions as soon as possible, and the value of employer contributions.


Removing barriers and levelling up Our interviewees showed strong support for removing the cur- rent barriers to saving. Young people could not understand


why they were being treated differently to older workers with 72% agreeing that employees aged under 22 should be treated the same as those aged 22 and over and be automatically enrolled into a pension.


Almost three-quarters (72%) of young workers would like to see a more progressive system that offers additional support to low earners, as is the case in Australia. At Legal & General, we support the recommendations in the government’s 2017 review of auto-enrolment to lower the age threshold from 22 to 18 and remove the lower limit of qualify- ing earnings. We would also like to see government, regulators and those of us in the financial services industry working even harder to promote pension benefits more clearly. And perhaps there is an argument for examining the case for financial education in our schools.


Onwards and upwards for auto-enrolment The success of auto-enrolment is reflected in the fact that nearly three-quarters (73%) of the workers we surveyed across different age, wage and gender categories, now have a work- place pension, and that nearly all of these (94%) are paying into it. It’s also heartening to hear that once they understand the ben- efits, many workers are interested in signing up to a workplace pension. So, despite the challenges for groups such as younger workers, there are signs that by developing the auto-enrolment model to be more inclusive, and through re-doubling efforts to boost knowledge of pensions, we could extend the reach of this precious employee benefit to help improve the retirement prospects of older people after their years of hard work.


Important information For professional clients only. Past performance is no guarantee of future results. The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested. Views expressed are of LGIM as at August 2022. The Information in this document (a) is for in- formation purposes only and we are not soliciting any action based on it, and (b) is not a recommendation to buy or sell securities or pursue a particular investment strate- gy; and (c) is not investment, legal, regulatory or tax advice. Legal & General Investment Management Limited. Registered in England and Wales No. 02091894. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No. 119272


November 2022 portfolio institutional roundtable: Defined contribution 23


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