Employees’ right to opt-in to workplace pensions schemes should be taken away to ease the burden on employers, says L&G pensions strategy director Adrian Boulding.
Currently, some employees who do not earn enough to be automatically enrolled into their employer’s pension scheme still have the statutory right to join. But speaking at a DWP select committee inquiry into the progress of auto-enrolment, Boulding said opt-ins could “be done away with”.
He said the number of people choosing to opt-in was “very low, almost infinitesimal” and was a “completely unnecessary burden on employers”.
He said: “The opt-in rate – those people not auto-enrolled but who have a statutory right to opt in – is very, very low and is really a completely unnecessary burden on employers.
“Those opt-ins in our experience are very low, almost infinitesimal – it’s a burden on employer communications, it’s a burden in terms of what the scheme has to offer and frankly it’s not being taken up by employees. That is an area where if you wanted to lighten the burden, that is something that could be done away with.”
Now: Pensions chief executive Morten Nilsson supports the removal of opt-ins, but only for the three-month postponement period employers can use to delay auto-enrolment.
He says: “In our experience, opt-in levels are extremely low – less than half a percent – and do add a lot of additional complexity for employers. We would support removing the ability to opt in during the postponement period as this would significantly simplify communications for employers.”
But CBI head of public services reform Jim Bligh says opt-ins play a crucial role and that the administrative burden on employers is not great.
He says: “The issue here is thresholds. Our view is very strongly that the threshold has gone up and so the target group for auto-enrolment, which is people who earn less than £10,000, are now not automatically included.
“They should of course be able to enrol in a pension scheme so they can get saving. Opt-in gives people a choice of whether it’s affordable for them.”
The Government is currently consulting on the earnings trigger for auto-enrolment and the thresholds used for calculating employees’ contributions.
Bligh adds employers have to communicate with their employees in any case and there is “no reason why they would stop communicating with people who earn less than £10,000”.
He says: “A bigger burden would come if we lowered the threshold, which would be an administrative nightmare.”
Standard Life head of workplace strategy Jamie Jenkins also thinks opt-ins should remain in place.
He says: “If we remove the opt-in approach altogether, then those on lower earnings stand to lose out. This is a particular issue for people with multiple, low paying, jobs, for whom opting in may be entirely appropriate.
“Instead of doing away with it, we should heighten awareness to increase take up amongst those who would benefit most.”