Just one in 10 employees opt out of automatic enrolment
Findings from a new report commissioned by the Department for Work and Pensions indicate that around one in 10 employees opted out of automatic enrolment in the first tranche of organisations subject to the workplace pension reforms.
The reforms require employers to automatically enrol all eligible workers into a workplace pension scheme, although workers may choose to opt out. Employers are also required to make a minimum contribution into the scheme. The new duties were introduced for the largest employers in October 2012 and will apply to all sizes of employer by April 2017.
The new report presents the findings from a nationally representative survey of private sector employers carried out jointly by the National Institute of Economic and Social Research (NIESR) and TNS-BMRB Social Research. The 2013 Employers’ Pension Provision survey (EPP 2013), is the tenth in a series of surveys, and the first since the introduction of the workplace pension reforms.
According to the report:
The percentage of employees who had opted out, or left, a scheme after being automatically enrolled was between 9% and 10%. The rate was lower among occupational schemes (6%) than among non-occupational schemes (12% -14%).
The average employer contribution received by members in automatic enrolment schemes was seven per cent (9% in occupational schemes, 6% in GPP schemes and 5% in SHP schemes). However contributions are expected to be lower, on average, among those employers who have not yet begun automatic enrolment.
Three fifths (61%) of automatically enrolling employers judged that the reforms had led to an increase in their total pension contributions. The most common responses to deal with any increase were to absorb this through an increase in overheads (84%) or through a reduction in profits (64%). One quarter (26%) of employers judged that the reforms had resulted in an increase in their administrative costs.
Employers who had not yet passed their staging date were asked about their state of readiness for the reforms. Among this group of employers, three-quarters (77%) had not done anything in preparation for the reforms. One fifth (19%) had begun planning but not implemented anything; 2% had completed planning and were starting to implement while 2% had fully implemented plans.
Lucy Stokes, co-author of the report, said: “These findings paint a fairly positive picture of the workplace pension reforms so far, with only a small proportion of employees choosing to opt-out of automatic enrolment and relatively favourable contribution rates from employers. However, we may well expect to see more employees opting out and lower contribution rates as the reforms roll out to other employers.”
