The Government’s automatic enrolment reforms have been dealt a significant blow after research revealed two-thirds of employers expect opt-out rates to be higher than 20 per cent.
A survey of 1,200 small, medium and large employers, carried out by the Institute of Directors, found that 42 per cent of companies expect over 20 per cent of employees to opt-out.
A further 24 per cent think more than 50 per cent of employees will decide not to pay into a pension.
IoD senior pensions policy adviser Malcolm Small (pictured) says the results mean the reforms could fail.
He says: “The high level of opt-outs expected by employers suggests that the central policy objective might be defeated.
“There was also a strong theme of aversion to ‘pensions’ amongst employers who do not currently offer a pension.
“The pension brand is seriously damaged goods in their eyes, with the likes of Maxwell and Equitable Life leaving many thinking pensions are a con.”
The research also reveals uncertainties about the take-up of Nest, with only 27 per cent of employers saying they will use the scheme and 37 per cent saying they remain “undecided”.
Over 40 per cent of companies said they would either freeze or cut salaries in response to having to pay a 3 per cent pension contribution, although a third said they would carry the cost from profits.
However, just 4 per cent plan to make redundancies.