Results from first employers ‘bode well’, says pensions minister
More than nine out of 10 people auto-enrolled into a workplace pension by their employer are staying in the scheme, initial government figures have revealed.
Auto-enrolment began for the UK’s largest organisations last October, and the Department for Work and Pensions (DWP) has now published the first results gathered from the country’s 50 largest employers.
The statistics showed that on average, just 9 per cent of staff opted out of the pension that they were auto-enrolled into. Individual company opt-out rates varied from 5 per cent to 15 per cent.
This compares to previous DWP research which predicted an overall opt-out rate of 30 per cent – but that included businesses of all sizes, some of which will not be auto-enrolling employees until 2018.
Today’s figures also suggested that more staff aged under 30 were remaining in pension schemes than in any other age group. The government welcomed the new statistics and hailed the start of “a savings revolution”.
“Seeing our largest employers report such low opt-out rates bodes well for this ambitious programme, which will see millions more putting money aside for the future,” said pensions minister Steve Webb.
“The sooner people start a pension the better, and this report shows that young people are keen to take charge and plan for their future.”
NEST – the government backed pensions provider available to any employer – confirmed that the DWP figures were in line with their own findings.
“These excellent results reflect what we’re seeing at NEST,” said its CEO Tim Jones. “Opt out levels at NEST are less than 10 per cent so far, which suggests the message that we all need to save more for tomorrow is hitting home.”
The latest results come after the Pensions Regulator announced last month that one million workers had now been auto-enrolled.
By 2018 the government expects that between 6 million and 9 million people will be saving more into a pension or joining a scheme for the first time.
However, observers have noted that with another 29,000 employers set to reach their staging dates in the first half of 2014, it was still uncertain whether smaller firms were equally prepared for the process – or what the UK’s final opt-out rate would be.
There will also be 1.7 million employees in the UK ineligible for auto-enrolment because they do not fit the criteria – which is workers aged 22 and over (but under state pension age), who earn more than £9,940 per year and are not already in a qualifying pension scheme.
The CIPD’s next Reward Forum Workshop will be held on 19 September, and is entitled ‘Pension auto-enrolment: the lessons for small and medium sized organisations’