How defaults reinvented workplace pensions

It’s easy to get downhearted when you think about politics. So let’s take a moment to be cheerful in these hyper-partisan, Brexity times. Sometimes politicians do leave legacies that make a real difference to people’s lives.

In 2012 there was a crisis in pension saving. Fewer than half (47%) of UK workers were saving towards their retirement in a workplace pension scheme, and many were facing an uncertain future due to their lack of provision. Speaking to people across the income spectrum at the time on a project for the National Employee Savings Trust it was clear were lots of reasons for it. For some, affordability was the issue. Others didn’t think much about the future – retiring seemed a long way off and they assumed “things will work out.” Many more however fell into the “I always meant to but never got round to it” category.

Inertia is a powerful force. Our attitudes and intentions may clearly point in one direction, yet our behaviour won’t necessarily follow. Stacked on top of each other the friction costs involved in opting-in to a pension act as a barrier. Thinking about the future is hard. People find finances boring (shock horror!) so considering a pension provider, deciding which funds to invest in and then filling out the paperwork is not fun. All this meant a significant proportion of people who wanted a pension never took one out.

That all changed in 2012 when new pension rules were enacted, and large employers became responsible for auto-enrolling staff into workplace pensions by default. The decision point – the barrier – was removed.

The results were profound. ONS data (see figure below) showed that by 2018 more than three-quarters of us (76%) had a workplace pension, a significant increase.

Proportion of employees with workplace pensions in the UK - 1997 to 2018

This ‘nudge’ was transparent: people could opt-out if they wanted to. But when we are presented with a default option already set we tend to accept it, going with the flow. My interpretation? There were a pool of people with a latent intention to save who were helped by this intervention – and they’ll end up happier retirees as a result.


  • Like with a lot of examples in behavioural science, findings are counter-intuitive. The person in control of the decision is the person who designs the “choice architecture”– not you.
  • Little “friction costs” add up. If you make it hard to do something, fewer people will do it.
  • Defaults are probably the biggest behavioural lever you can pull. Their use can quite easily backfire, so should be carefully considered.
  • In this instance there was a huge amount of supporting education, communication and stakeholder engagement that complemented the pension rule changes. Interventions are not binary: educative nudges which “strengthen the hand of System 2 by improving the role of deliberation and people’s considered judgements” (Sunstein & Reich 2019) supplement the non-educative nudge (the default opt-in) in this example



About Simon Shaw

I'm a Director at an insight consultancy. I'm interested in marketing, market research & consumer psychology. The views expressed are not necessarily those of my employer.
This entry was posted in Behavioural Economics, Behavioural Science, Consumer Psychology, Market Research and tagged , , , , , , . Bookmark the permalink.

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