The Department for Work and Pension’s latest research into the take up levels of workplace pensions has now been published.
The Department for Work and Pensions (DWP) surveyed a sample of 50 medium sized employers with staging dates between January 2014 and July 2014. The objective of the survey was to assess the percentage of employees choosing to opt-out of automatic enrolment, along with the reasons given for doing so.
The employers surveyed had a total combined workforce of 7,500 workers, with each employer ranging in size from 90 to 499 workers. The data analysed by the DWP relates to responses from 46 employers (4 did not provide detailed opt-out data), representing a combined workforce of 7,200 workers. 44% of employees were already members of a workplace pension scheme, with 35% being automatically enrolled into a workplace pension scheme.
Of the workers who were automatically enrolled, 12% opted out of automatic enrolment within the statutory one month period (a further 2% opted out within three months of being automatically enrolled, but did not fall to be treated as opt-outs under the automatic enrolment legislation). In a similar study undertaken in 2012/13 of 50 of the largest employers, it was found that there was an average opt-out rate of 9%, suggesting that size of employer was not an issue. In both studies, individual opt-out rates for employers were between 5% and 15%.
The DWP also surveyed 100 of the workers making up the 12% who had chosen to opt-out. Interestingly, opt-out rates were highest amongst older workers and, perhaps surprisingly, lowest amongst the youngest workers.
Opt out rates by age group were as follows:
|Age||Percentage opting out|
|30 - 49||9%|
The opt-out rate amongst part time workers was 18%, compared with 10% for full time workers.
Top reasons cited for opting-out
- Already having adequate retirement provision
- Too close to retirement for new pension saving to be worthwhile
- Employer contribution rate too low to make pension saving (over other types of savings/investments) worthwhile
- Planning on changing jobs
- Concerns around pensions as a savings vehicle (rate of return, long-time frame and lack of control).
Choice of pension scheme
Most employers setting up new pension schemes to deal with automatic enrolment used master trusts, with the most popular master trust being the National Employment Savings Trust (NEST).
Affordability for employers
Many employers expressed concerns about the cost of employer contributions. Methods of dealing with this proposed by those employers were:
- Reassessing salary increases
- Reassessing future worker recruitment
- Increasing prices or fees.
What did those employers surveyed advise for employers who had not yet reached their staging date?
- Allow a preparation period of 6 to 9 months ahead of staging
- Clear and appropriate communication with the workforce is key
If you have any questions about auto enrolment, please contact a member of our specialist pensions team below.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.