Auto enrolment opt outs under the spotlight

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Auto enrolment (AE) has been implemented in large businesses since October 2012 and as part of the Department for Work and Pensions (DWP) commitment to evaluating the effects of the workplace pension reforms, they have conducted some in depth research covering the first six months of AE, explains the CIPP’s Diana Bruce.

In their initial report they state the key factor affecting actual participation levels and the impact of AE on workplace pension saving, is the number of workers who choose to opt out after being automatically enrolled, and as such this was the main focus of their study.

Recent features in the media have sported headlines along the lines of '9 out of 10 staying in after automatically enrolled' and 'opt out rates lower than expected'. This is due to one of the statistics to come out of the research, that of the 50 large employers from varying sectors and industries (between 6,000 and 120,000 employees) who participated, an average of 9% of workers opted out. Findings from previous research showed that 30% were likely to opt out, however this study was across all employer sizes, not just the largest so is not a true comparison at this stage. However the results are still very positive as across 42 of the employers who provided detailed data, it was estimated that overall participation in a workplace pension increased from 61% to 83%.

Opt out rates showed...

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20th Aug 2013 16:46

Mixed messages ....

On the one hand we have the Government encouraging the workforce into auto-enrolment and on the other, the same Government is trying to constantly erode the LTA (Lifetime Allowance) of those with Sipps; whilst at the same time refusing to address the inequalities between public & private sector pensions which will potentially destroy our children’s futures with a massive public sector pension debt legacy

We also have the question of investment returns for anyone currently saving against a backdrop of Government artificially depressed interest rates; so that they can try and inflate their way out of debt

Clearly people should attempt to provide for their retirement, not least because the state is so far in debt that no-one knows how it will get out of this position. However, the Government seems to be doing its best to scotch this with constant meddling - to the extent that one now needs around £400k in a personal pension to get £27k annual income

Inevitably the question arises over what is the benefit of saving meagre sums into a pension each month when the investment return is negligible and this is reflected by opt-outs for the over 50's. Although it may be percieved as a windfall for anyone remotely associated with the pension industry

In fact one would go so far as to say that unless you are a higher rate tax payer it is simply not worth saving into a pension at all - put any savings into an ISA because you have far greater control over them, will not be swingingly penalised on death (55%) or subject to cuts in income and are subject to fewer Government changes in direction

Pensions are supposed to be a long term contract between worker and the state. Unfortunately the state constantly abuses its position in this arrangement by changing the rules surrounding pensions (i.e. GB raid, interest rate fixing, GAD rate fix etc.) because pensions are seen as an easy cash cow to milked at will to bail out a profligate debt-ridden state

Governments are untrustworthy and quite frankly the risk of their interference during the life of your pensions is almost guaranteed - however, without trust one has no basis for saving for one’s retirement

Who is to say that if times get really tough the Government will not nationalise all pensions? After all it has been done in other countries in the past; and don't think you have any recourse if they do

Thanks (10)
22nd Aug 2013 11:54

Wow .....

..... great comments above !!!

Thanks (1)