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Gov’t facing auto-enrolment opt-out problems


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.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. Telling a hard pressed single Mum that she has to save for a pension, when she is worried about paying utility bills and the groceries is like Marie Antoinette telling the poor to eat cake when they have no bread. And we all know what happened to her…

  2. What part of ‘They don’t have the bleedin’ money’ don’t these people understand….?

  3. No surprises hear.

    Couple this with the “ACTUAL” outcome for “Consumers” with the RDR and the savings and financial capability of the UK,s general public will be cataclysmic with the real effect not definable until say 2025 and beyond.

    Most advisors with a wider interest than just self interest sit back and watch in disbelief.

  4. If anyone is in Falkirk on the 29th June, Steve Bee Pension Partner at Paradigm is presenting to Financial Advisers re auto enrolment.

  5. If people want to live on a state pension and nothing else, that’s fine. However I for one can see that this is unsustainable and private provision is the right thing to do. Unless the important part of this message is not in bold type at the top of the page, there will be no propensity to save by the general public. The public seem to have little sympathy for the teachers and other public sector workers demanding generous pensions. The reasons for the public sector pensions changing is their unsustainability. How is the state pension argument any different?

    I think it was in Logan’s Run where everyone had to die at 30, perhaps that’s the answer.

  6. For 10 years the FSA has done nothing but bad-mouth everything to do with pensions, pension advisers and the financial services industry so they should feel either proud their message has been swallowed whole by the public, or hang their heads in shame for being such a total and utter waste of space.
    Hmmm, which do you think….?

  7. Richard Brydon 16th June 2011 at 6:51 pm

    Is it any surprise that lower paid employees will opt out of this scheme? It’s not just this extra expense involved, it’s on top of inflation eating away at the money left to get by on. And that’s what many people do, they just about get by.
    I’ve yet to hear of our politicians and regulators abandoning their gold-plated pension schemes in favour of a money a purchase one.
    It’s a huge problem but it won’t be solved with NEST or whatever other name that it’s given.

  8. John Blackmore 17th June 2011 at 8:07 am

    Make it compulsory. Start out with small contributions and then increase slowly just as they did with income tax.

    No one has the right to be poor and then expect the rest of us to feed them. The Dickensian days of allowing women and children to starve are thankfully behind us. But this does place a responsibility on everyone to provide for old age.

  9. I am inclined to agree with John Blackmore. I often describe the fact you can’t access your pension ntil 55 as protecting the 65 year old you from the 25 year old you and to some extent taht is what compulsion would do. We are NOT at the compulsion stage though, it is auto enrolment we should be thinking about and making sure it works for the people it should do.
    As Norm D-Plume implied, if you can#t afford to put bread on the table, then despite missing out on the mandatory employer contributions from 2013, those who cannot afford to eat, should opt out.
    My concern is that many will opt out who COULD afford to enter and in opting out, they are simply passing up the employer contribution which is frankly stupid.
    The only thing which will help people make an informed and sensible decision is education/advice. The problem is how will this be funded as it coudl be seen as in the employer’s best interest for employees to opt out as it will save them on payroll. Positive employers get a good adviser to “sell the benefits” to staff and talk it up as a valuable staff benefit. It will not be as easy to talk it up as a positive that the employer is doing when it is mandatory for the employer to do, so why should they pay for someone (and adviser) to talk it up, if anything they may want the pension to be a flop to save them money as staff often only look at the net pay figure on their payslips.
    Can’t remember what my point was now and I think that is the problem with Auto Enrolment, NEST, Stakehodler et all, we’ve all forgotten what the point was!

  10. The point of AE is to offest the humungous cost of providing state benefits in the future by forcing employers to ‘encourage’ people to save in private pensions. Means testing is a major issue – low paid people probably should NOT be saving in private provision – that is the main reason people are able to opt-out. Only if we get rid of means testing and sort out the state benefit system (£155 universal state pension?) will full compulsion be a vague possibility…I wouldn’t hold your breath…

  11. If only the government would honour its pre-election pledge to undo all the damage inflicted on pensions and, as a result, to public confidence in them, then the need for NEST would probably melt away. Herding people of modest means en masse into a retirement savings system towards which they presently have an ever increasingly deeply grained aversion is emphatically not the best way forward. As ever, carrot is better than stick. The tragedy is that these people just can’t see it.

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