This addition aims to address the issue of participation versus engagement in group pension schemes by automatically increasing the member’s contribution by an agreed percentage at set time periods for the duration of the plan.
Axa says that research has revealed that 68 per cent of pension plan members think the amount they are saving is too low although only 14 per cent of those planning to start saving actually do.
The Save More Tomorrow proposition is agreed with the pension member at outset and automatically increases their contribution without any further action or decision making required.
Combining the Save More Tomorrow approach with automatic enrolment and limited investment choice has been successful in both encouraging employees to join company pension schemes as well as encouraging them to save more. Research from the USA saw Benartzi and Thaler witness a 78 per cent adoption rate in one scheme as well as an increase in savings rates from 3.5 per cent to 13.6 per cent in less than four years
Head of corporate partnerships Mark Rowlands says: “We have carried out extensive research around behavioural finance and were not surprised to find a lack of action and high levels of inertia when it came to planning and investing into a pension.
“There are a number of ways we as an industry can improve contribution levels within group pension schemes and they centre round a combination of scheme design coupled with engaging and communicating with the scheme members.
Rowlands adds: “By automatically increasing contributions, we are helping people to increase their pension pot to deliver a better income in retirement. The real beauty of this enhancement is that the increases can be arranged to coincide with key dates, like pay rises, so that employees don’t feel the pinch of a decrease in income.”