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Ritchie warns of ‘opt-out culture’ from NPSS

Employers could create an opt-out culture from the Pensions Commission’s National Pensions Savings Scheme by offering pay rises to discourage employees from joining their pension schemes, warns Stewart Ritchie.

Scottish Equitable’s director of pensions development told an NAPF seminar that employers could offer as much as a 6.5 per cent pay rise as an incentive to employees to opt out.

He said employers could claim that the employee’s 5 per cent default contribution could instead be given as cash in hand along with half the employer contribution of 3 per cent, as set out by the Pensions Commission.

He said this disincentive could be stopped if there was advice in the workplace to ensure employees were making sensible decisions about retirement planning.

Ritchie said: “An opt-out culture in SMEs could amount to a risk of worst of all worlds if there is levelling down without levelling up. The only way this behaviour can be curbed is with advice.”

Watson Wyatt senior consultant Stephen Yeo says: “The Turner report failed to take into account in its statistics that there are employers who have chosen not to take up auto-enrolment and still may not want to, if forced to, and may get people to leave the NPSS.”


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