Auto-enrolmentJan 9 2017

Almost half of SMEs back scrapping auto-enrolment opt-outs

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Almost half of SMEs back scrapping auto-enrolment opt-outs

Close to half of small and medium-sized enterprises would support a move to make contributing to a workplace pension mandatory for all employees, a survey commissioned by The People's Pension has found.

The survey, conducted by YouGov, revealed 43 per cent of SME "decision makers" whose businesses had already entered the auto-enrolment regime would support taking away the opt-out element of workplace pensions.

This would transform the current voluntary system - whereby employees are automatically enrolled into a workplace pension but can opt out - into a compulsory system in the Australian mode.

More generally, the survey found high levels of support among SMEs for the auto-enrolment system as it is, with 60 per cent of the 898 respondents saying the system was "fair".

Support was higher among those whose businesses that had already "staged" (i.e. entered the auto-enrolment regime), with 66 per cent saying the system was fair.

Seven out of 10 of this group, meanwhile, said auto-enrolment was good for their employees, though only 50 per cent believed it was good for their business.

More than a third (37 per cent) were paying more than the mandatory 1 per cent employer contribution, while 46 per cent believed they had a role in encouraging their employees not to opt out.

The UK's biggest companies began staging in 2012, and the process is due to be complete in 2018. 

According to the government-backed auto-enrolment provider Nest, around 700,000 small and micro-businesses will stage this year. 

About 51 per cent of this group also supported bringing workers currently excluded from auto-enrolment, such as the self-employed and low-paid, into the regime. 

The People's Pension's director of policy and market engagement Darren Philp said it was "good" to see widespread support for the system among SMEs.

"Those that have already staged are more positive, which might be because having been through the process they know it’s not as hard as they expect – and can see how beneficial it is for their employees," he said.

He also welcomed the support for bringing excluded workers into the system.

"Their current exclusion affects part-time workers, more likely to be women, and their inclusion could – over time – go some way towards tackling some of the inequalities we have in our pensions system."

While reforms on the latter points were addressed in the government's initial statement on this year's auto-enrolment review, potentially making the system compulsory was not. 

The government also confirmed it would not consider lifting contribution rates beyond 8 per cent of earnings, which is due to come in to force in 2019.

Currently minimum contribution rates are 2 per cent - half coming from the employee and half from the employer.

james.fernyhough@ft.com