The vast majority of pension savers fear the Covid crisis will have a negative impact on their finances, according to new research from Nest.
Nest, the largest pension scheme in the country — in terms of members and employers — found that almost half of these savers thought these negative effects would be “significant”.
However, this is a slight improvement from similar research undertaken in March, which showed 80 per cent fearing coronavirus would negatively impact their finances, and 60 per cent saying these effects would be significant.
The survey comes as changes to the Job Retention scheme begin to take effect, and the number of redundancies continues to rise.
Just over a third (34 per cent) of furloughed Nest members report Covid-19 will impact their finances a great deal over a long period of time, compared to only 17 per cent of those still employed full time.
Amongst those furloughed, 38 per cent say they are just making ends meet, 7 per cent are having to draw on savings, and 10 per cent say they are running into debt.
Nest says that with financial pressures becoming more prevalent it is important to think more broadly about financial resilience int he short term, as well as into retirement.
Nest Insight, the independent research unit set up by Nest Corporation, is leading a programme of research on these interactions. Working with industry, funding and academic partners, the Nest Insight team is currently running a UK research trial to test the impact of a combined savings tool, often referred to as the ‘sidecar savings model’. This is where a short term ‘emergency savings’ account is linked to a traditional DC pension and contributions are made to both pots via employees’ payroll.
Nest’s Director of Customer Engagement, Mark Rowlands, says: “While fears over the impact of coronavirus are still widespread, our research shows workers were feeling more positive in June, at the height of lockdown, than at the outbreak of the pandemic.
“This suggests the steps government took to support jobs and workers helped calm fears. We are concerned the trends we are seeing among our membership highlight existing inequalities and reveal an uncertain future for a vulnerable section of the labour market.
“The full impact on workers as the economy slowly recovers and the job retention scheme unwinds remains to be seen, but the pandemic has shown us the importance of policy in helping secure short and long-term financial resilience.
“Automatic enrolment transformed the UK’s pension saving landscape and we can learn from how it was developed and implemented to help promote shorter term financial resilience too. We will to continue to work together across all financial sectors, supported by government, to develop programmes which will explore how workers can be supported to build up short term savings as well as longer term pension pots.”
Nest has yet to see any significant changes in member behaviours due to Covid-19 – with opt-outs, cessations, and members accessing their savings at the same rate as in previous years. It is widely thought the full economic effects of the pandemic are still to be felt, and these rates may increase as a result.
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