High levels of opt-outs amongst younger workers predicted
More than half of corporate financial advisers think that up to 30 per cent of UK workers could opt out of pensions into which they have been automatically enrolled, according to research from Aviva.
The research shows 20 per cent of advisers expect half of all employees to opt out, with half of those polled believing those under age 35 will be most likely to do so.
Of the top five reasons advisers gave as the main barriers to saving amongst the 35 and under age group, the largest proportion, 80 per cent, said they don’t think younger workers can afford to save, while 72 per cent said that they have other financial priorities, 69 per cent believed that they think they are too young to worry about their retirement.
But more than half, 55 per cent, of corporate advisers believe that a company pension scheme is still the most attractive way for younger workers to save. A further 34 per cent identified other savings vehicles such as Isas and share schemes as the next most popular mode to saving for the long term. Two percent suggested a compulsory pension scheme could be the way forward.
The research found that despite the widely held view that other financial priorities such as house purchase and student debt weighed more heavily on these groups, advisers are actively targeting younger workers with specific communications.
Aviva director of workplace savings Paul Goodwin says: “Our work with our customers and advisers indicates that there is already a lot of consideration being given to planning for auto-enrolment but, at the same time, more thought still needs to be given to how we engage with employees so that opt outs are minimised.
“It’s good to hear that four in ten advisers are actively trying to stimulate open communications between their clients and their employees but, more must still be done to minimise the predicted level of opt out figures. It is apparent that there is still quite a gap between the information that is given to clients and what employees actually feel they receive.
“It’s up to us as an industry to work alongside the Pensions Regulator to not only ensure the successful implementation of automatic enrolment, but make sure that employees know the options available to them, the benefits of a workplace scheme and what the consequences of opting out will have on their future lifestyle.”
In separate research, Aviva found that only 14 per cent of 25-35 year olds have received any data from their employer about the benefits of a workplace pension scheme, and just 15 per cent have access to financial planning sessions. When asked about their attitude to savings, the main reasons younger workers gave for not saving into a workplace pension were that they could not afford to pay into one (20 per cent), or they worked for someone who didn’t offer one (19 per cent).
Only 3 per cent said they are too young to worry about their retirement, and 4 per cent said they don’t trust pensions, while 26 per cent said they want to save into some sort of pension within the next five years.