Opt-out rates for Nest could rise to 40 per cent, almost double the forecast of the previous Government, according to outgoing president of the Society of Pension Consultants Duncan Howorth.
A Department for Work and Pensions report in 2008 predicted the opt-out rate will be around 22 per cent but Howorth says many savers have had the option of tax relief on pension contributions before and not saved.
He says early access to retirement savings would make pensions more attractive.
Howorth says: “What we all need to address is how we can encourage more people to save for their retirement. We have obviously got auto-enrolment itself coming. My expectation would be between 30 and 40 per cent will opt out, which is quite high but bear in mind a lot of these people will already have had the option to save in the long term but have not.”
Howorth also suggests that tax-free cash and trivial commutation are better incentives for most people than retaining higher-rate tax relief.
He says: “Tax-free cash always rears it head from time to time. Personally, I think it is more important to preserve that than to preserve higher-rate tax relief.