But experts warn that ‘opt-out figures don't tell the whole story’
The Department for Work and Pensions (DWP) has cut its forecast of how many people it expects to opt out of auto-enrolment into pension schemes by half, from 30 per cent to 15 per cent.
This revision increases the number of new pension savers as a result of auto-enrolment from 8 million to 9 million.
The change comes after DWP data revealed opt-outs from the largest schemes were lower than expected at between just 9 per cent and 10 per cent.
Minister for pensions Steve Webb said: “Automatic enrolment is proving significantly more successful than previously predicted. With opt outs remaining low we now expect 9 million people will be newly saving or saving more as a result of our reforms.”
Commenting on the revised forecast, Tim Jones, chief executive of the National Employment Savings Trust (Nest), said: “If these predictions are correct it’s very promising news for future generations of pensioners, who’ll be better off as a result. A workplace pension is a great helping hand for the future and it’s encouraging to see this message getting through. Our current opt out figures are around 7 per cent and hopefully they’ll continue to stay low.”
However, independent financial service providers Hargreaves Lansdown warned that the number of official opt-outs don’t tell the whole story. The provider said in this context an ‘opt-out’ refers to someone who stops pension saving within one month of being auto-enrolled. But people who decide to stop after this period are not counted. The provider recommended that the opt-out figures should be checked against the number of active pension savers, to give a truer picture of how many people could be slipping through the net.
Laith Khalaf, head of corporate research at the financial services specialist, said: “The DWP may be counting their chickens before they are hatched. Early signs from the auto-enrolment programme are encouraging, but much of the heavy lifting still needs to be done.
“In particular as smaller and medium-sized companies start to auto-enrol, opt-out rates may grow. Likewise as auto-enrolment contributions rise above 1 per cent of salary from 2017, employees may start to flinch at more of their pay packet going into a pension.”
Khalaf said that employers needed to help employees understand why they are paying into a pension or they could lose out in the long-term.
“Employers can achieve this by supplementing auto-enrolment with financial education in the workforce, to explain to members how much they should be putting away for retirement, and how to make the most of the savings they have made,” he added.
Figures from The Pensions Regulator, released yesterday, show 3.2 million have been enrolled into a pension and nearly 11,000 employers have now registered.
Government research also found that the percentage of private sector employees who are members of a pension scheme rose from 26 per cent in 2011 to 35 per cent in 2013.
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