Opt-out rates for auto-enrolment have averaged 9 per cent across employers, with most companies experiencing opt-out rates of between 5 and 15 per cent, data from the Department for Work and Pensions reveal.
The DWP’s first report on opt-out rates amongst employees revealed that even among employers who had previously used auto-enrolment programmes on a contractual basis, contractual rather participation rates have still increased from 90 per cent to 96 per cent
Unsurprisingly, the highest opt-out rates are among the over-50s, DWP found. Many commentators have suggested employees approaching retirement will either already be saving for a pension separately or are likely to feel they are too close to retirement to benefit from the contribution rates.
The most important factor influencing the level of opt out was contractual enrolment, DWP said. Where this was already in place, many of those automatically enrolled had opted out of workplace pension saving in the past and so were twice as likely to opt out again.
A sample of 50 employers with automatic enrolment start dates falling between October 2012 and April 2013 was taken using records from the Pensions Regulator, of which 42 provided opt-out data representing around 1.9m workers.
Across the 42 employers providing detailed data, it is estimated that overall participation in a workplace pension increased from 61 per cent to 83 per cent. This equates to a rise from around 1.2m workers to 1.6m.
Before automatic enrolment began, evidence from the DWP’s Attitudes to Pensions 2012 survey showed that 70 per cent of eligible respondents thought they would ‘definitely’ or ‘probably’ stay in a pension scheme once enrolled. Some 15 per cent said they would ‘definitely’ or ‘probably’ opt out of the scheme, and 14 per cent said they were unsure.
These results are significantly better than the pre-event forecasts which had predicted opt-out rates of up to 30 per cent, Hargreaves Lansdown said.
Tom McPhail, head of pensions research at Hargreaves Lansdown, listed five auto-enrolment challenges that he believes remain ahead, the most critical of which he said is increasing pension contribution rates.
Other challenges include maintaining high participation rates among smaller employers; encouraging the over 50s not to opt out; encouraging opt-ins; and getting through the “bottle-neck” when 29,000 employers hit their staging date in the first half of 2014.
Mr McPhail said: “These early results are encouraging however there is still a great deal of work to be done, the largest employers were always likely to produce the best results so the real challenges still lie ahead.
“By the end of 2014 we’ll have a much better idea of whether we really are getting to grips with the pensions crisis.”
