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L&G calls for end to ‘completely unnecessary’ auto-enrol opt-ins

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.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. If opt-ins were removed this could be deemed to be sexist given that women on average earn less than men (so I’m led to believe) and therefore if a large swathe of low earners have this option removed from them (notably those who would benefit from an Employer contribtuion if they opt in) the danger is that in years to come a class action will be taken against the Government on the grounds it was sexist given that it may well be women who were most affected by it.

    Ok, perhaps that’s a bit glib, but in this world of litigation and given the importance of sex equality I feel that any such restrictions could come back and bit the legislators.

  2. The whole framework for AE RB schemes is, in my view, a mess. Why not just stipulate that all employers must set up a scheme of their own choosing with their own choice of adviser remuneration structure and offer it to all employees?

    The only thing that need have been made compulsory is for employees to attend a presentation explaining the benefits of joining and the folly of not doing so. Hands up all those who consider you’ll be able to live comfortably on £140 p.w. or who believe that a contribution from your employer to your retirement fund isn’t worth grabbing with both hands. The charges are low and you won’t even be forced to buy an annuity at the end of the day. Anyone who turns down that kind of offer can go stew in their own juice. Job done.

  3. @Julian – I used to do a lot of GPP work and I think I was pretty good at presenting to staff and getting them to enter the schemes we had in place for the employers we dealt with which were single charged plans under 1% AMC with an employer contribution of either 3% matched by the EE or 5% ER matched by the EE.
    There were still idiots who took a year to return their one page decision form (no other details needed to enter on default funds etc), which is why entry by default (known as AE) was and IS required. That is all AE needed to be, not a complete re-inventing of the wheel by the F-pack and Govt.

    Had they have done that within a few years of stakeholder, those of us who actually tried to do what they wanted, would have actually earnt something for our efforts instead of having to think about doing it all over again with AE, but once bitten twice shy, I am only going to help existing client employers who already have GPPs, stuff the rest, leave it to NEST.

    Oh and auto enrollment opt ins MUST remain otherwise you are refusing to pay the same rate for different staff members working full and part time i.e. a lower hourly benefit to one employee (often the woman) who may well be able to afford to pay more because their spouse earns more.

    Why doesn’t L&G like keeping this bit? Could it be a system issue for them?

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