The Government’s automatic enrolment reforms have been dealt a blow after research revealed two-thirds of employers expect opt-out rates to be higher than 20 per cent.
A survey of 1,200 small, medium and large employers by the Institute of Directors found that 42 per cent expect over 20 per cent of employees to opt out. A further 24 per cent think over 50 per cent of employees will decide not to pay into a pension.
IoD senior pensions policy adviser Malcolm Small says the results suggest that the reforms could fail.
He says: “The high level of opt-outs expected by employers suggests that the central policy objective might be defeated.
“There was also a strong theme of aversion to pensions among employers who do not currently offer a pension.
“The pension brand is seriously damaged goods in their eyes, with the likes of Maxwell and Equitable Life leaving many thinking pensions are a con.”
Hargreaves Lansdown pensions analyst Laith Khalaf says: “Opt-outs on this scale would not be ideal for the Government but we have to remember that these are employers views, not employees.
“Until we actually have autoenrolment in place and peoples’ pay packets are affected, we are not going to know exactly how they will react.”
The research also shows uncertainties about the take-up of Nest, with only 27 per cent of employers saying they will use the scheme and 37 per cent saying they are undecided.
Over 40 per cent of companies said they would either freeze or cut salaries in response to having to pay a 3 per cent pension contribution although a third said they would carry the cost from profits.
However, just 4 per cent plan to make redundancies.