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DWP finds over 50s most likely to opt out of auto-enrolment

Elderly-People-Paperwork-Old-Pension-Pensioners-700x450.jpgPeople over 50 are the most likely to have opted out from their schemes  according to government research into auto-enrolment.

An interim report from the Department for Work and Pensions on auto-enrolment sheds light on how the policy is developing.

It is based on two research strands that examine how employers and their staff are reacting to the changes brought by auto-enrolment.

The evaluation of workers’ attitudes comes from qualitative depth interviews with a mix of workers who remained in employers’ schemes after being auto-enrolled.

It also features workers who had chosen to opt out of the schemes after being auto-enrolled.

So far the DWP has interviewed 49 workers, 37 who remained in their employer’s scheme, and 12 who opted out.

The report says: “It is worth noting that nine of the 12 opt outs we have interviewed so far were aged over 50. The most common reason that workers described for opting out was the feeling that they had already built up – or would have built up by the date they retired – sufficient provision elsewhere.

“Opt outs were typically either paying, or had paid off, a mortgage, and typically were still working full-time.

“The most common reason that workers described for opting out was the feeling that they had already built up – or would have built up by the date they retired – sufficient provision elsewhere.”

The analysis of companies is focused on qualitative depth interviews with 70 employers, conducted with at least one person who has been involved in the implementation of auto-enrolment.

Forty-three employers have been interviewed so far and show how companies have reacted to auto-enrolment.

Reacting to the report Quilter pensions expert Ian Browne says: “The latest auto-enrolment report from the DWP makes for comforting reading for policymakers as, among other findings, it shows that while employers are unaware that their pension contributions will jump from 3 per cent to 5 per cent in April, they feel either neutral or positive about it when they are made aware.

“In fact the qualitative research reveals that only a small proportion have opted out and the majority of those were over 50 with a rationale that they had already built up sufficient retirement provision elsewhere.

“However, complacency will be toxic to the policy as relying solely on the power of inertia for the continual success of auto-enrolment remains a real risk when you consider the general low level of pension contributions.

“We need to hammer home that foregoing yet more of their salary is not only worth it, it is necessary. Because without investing today the current generation risks poverty in later life.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. 49 people isn’t a survey it is a chat at the pub!

    please investigate a larger group!

  2. So it’s true that some people don’t want ‘free money’!!

  3. You’re drawing/publishing conclusions from a supposedly national survey that is based on a massive population of 47 people, of whom a full 9 fit your conclusion?

  4. But even if it’s based on a small number, all they have to do (new rates) is to pay in 4% net, 3% employer, 1% tax relief, watch the pot occasionally so that, when it gets near £10k, withdraw it all as a small pot, and get 85% (net of 20% tax on 75% of the fund). Where else can you make 70% + any growth in a short(ish) period of time

  5. Set aside £4 (perhaps less), get given £1 from the Government and another £3 (perhaps more) from your employer.

    Wait a bit.

    Cash it in (+/- growth and – charges).

    Assuming break even and 20% tax bracket, pay £1.20 back and keep the £6.80.

    Then repeat.

    Obviously, affordability may be an (arguably justifiable) reason, but there’s not much other reason not to stay in the scheme and get free cash.

  6. One wonders how many from this very small and thus hardly representative sample of people who’ve chosen to opt out of their employer’s AE schemes will, in years to come, wish they hadn’t.

    Reports on average pension pot sizes now, what those pots are expected to have become at age 60 or 65 if contributions to them are maintained and how big a pot is required at those ages to provide a decent/ adequate level of retirement income, in addition to State benefits and those from past membership of DB schemes seem to vary widely and are much debated.

    Not that many people are properly engaged with a clearly articulated and regularly reviewed programme of retirement planning. How many have any real idea of what adequate looks like? I somewhat doubt if many are in a position where, in their 50’s, they can say with confidence that their retirement finances are fully sorted and that there’s no point in contributing 3% of relevant earnings with 5% from their employer on top.

    How many people other than those, the value of whose aggregated retirement benefits from all sources are threatening to exceed the LTA, ever complain about having too much retirement income and that they wish they’d been less thrifty during their working life? Not many, I’d bet.

    If it’s there for the taking ~ take it.

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