DWP review shows more employees in AE schemes
Awareness and understanding of automatic enrolment among small and micro employers may be on the increase, but there are potential pitfalls ahead, Nathan Long has said.
“Awareness is increasing among small and micro employers, but if even 1 per cent of the companies yet to stage do not comply, this is still almost 20,000 employers facing a problem,” the head of corporate pension research at Hargreaves Lansdown said.
Last week, the DWP issued its AE evaluation report 2015, which showed a rise of employees participating in a workplace pension rose to 13.9m, an increase of 3.2m since 2012.
Until the end of September, 5.47m workers were automatically enrolled by more than 60,000 employers, according to the DWP.
However, Mr Long said the low number of opt-outs cited in the report did not present the full picture.
The DWP claimed 10 per cent had opted out, with a further 3 per cent ceasing active membership.
Mr Long said: “It is notable that the government continues to pay no attention to the levels of opt-ins, in spite of the fact that over 5m employees working for companies that have already gone through AE are still not members of a pension.”
The low-paid and young may have benefitted from AE, but were more likely to opt out when contributions rise.
The largest increase in participation came from those earning between £10,000 and £20,000 while the biggest increase was among those aged 22 to 29.
Savings have declined. In 2012, the amount saved per eligible saver was £6,370, compared to £4,673 in 2014.
There was evidence also of some firms reducing contribution levels to accommodate AE. The DWP suggested this was down to the increase in the number of savers, with the majority making contributions at the current minimum levels.
“While the amount saved has dipped, this will self-correct when the legislation is fully rolled out and minimum contribution levels hit 8 per cent in 2018,” Mr Long said.
Earlier this month, the Pensions Regulator announced it had closed almost 500 AE cases and issued compliance notices to another 470 employers between July and September.
Adviser View
Laurence Sanderson, financial consultant at Essex-based Sterling and Law, said: “We are seeing a rise in employees participating in a workplace pension because they have no choice, and the figure is likely to go up unless there is a big opt-out, which we are not seeing at present.
“With more employer engagement, opt-in levels increase. It is a good thing that people are saving more and safeguarding their future.”
