Nest and The People’s Pension, two of the UK’s biggest auto-enrolment providers, have revealed that almost half of their members are not currently making contributions.
Of The People's Pension's 2.4 million members, just 1.3 million were currently paying into their pension. The remaining 1.1 million, or 46 per cent, were not.
Nest, meanwhile, revealed that around 1.6 million, or 40 per cent, of its 4 million members were not currently making contributions.
The People's Pension and Nest have opt-out rates of just 5 per cent and 8 per cent respectively.
The low opt out rates mean the vast bulk of the two schemes' 2.7 million inactive members had stopped contributing either because they had switched employers, become self-employed, suffered a fall in income, or stopped working altogether.
Most of those who switched jobs would have been auto-enrolled into a new workplace pension scheme.
The figures also appeared to show that a large number of people who have changed jobs since auto-enrolment began in 2012 were not opting to consolidate their pots into that of their new employer.
FTAdviser asked a selection of the UK’s major AE providers to disclose their scheme's level of inactive membership. Only The People’s Pension, Nest and Now: Pensions provided the information.
Now: Pensions revealed that a third of its nearly 1.1 million members were inactive, meaning they were not currently making contributions.
Given opt-out rates at Now: Pensions are just 6.2 per cent, that meant more than 25 per cent of Now: Pensions' members were inactive because they had left their employer.
Of the schemes that refused to disclose inactive membership figures, major life companies Standard Life, Aviva, and Zurich did so on the grounds that the information was "commercially sensitive".
Legal & General, meanwhile, did not give a reason for declining to disclose how many of their members were currently inactive.
Of the auto-enrolment providers who shared their total (active and inactive) membership figures with FTAdviser, Nest was by far the biggest, with more than 4 million members.
The People’s Pension was next, with 2.4 million, followed by Legal & General, with 2.2 million.
Now: Pensions was next with 1.4 million members, followed by Standard Life, with just over a million.
Zurich and Aviva refused to disclose their membership figures.
The “multiple pots” problem was anticipated before the introduction of AE, and there have been a number of suggestions of how to get around this.
Former pensions minister Sir Steve Webb favoured the “pot follows member” solution, which would have seen an individual’s pension pot automatically follow them when they switched employer, if it was under £10,000.
However, this scheme was eventually shelved.
Currently the proposed answer is the creation of a pensions dashboard, that will allow members to view all their pension pots in one place, making it easier to consolidate them in one scheme.
However, the pensions dashboard is currently a voluntary initiative, and as such a large number of providers are not involved.
Will Lovegrove, chief executive of auto-enrolment fintech business pensionsync, said ease of transfer differed from scheme to scheme, with insurance companies generally able to do it the most quickly, and single employer trust-based schemes often being “very slow”.
“The pensions dashboard initiative, should in theory, help put pressure on providers to implement faster, easier ways of transferring pots, in the same way that comparison sites and ‘bank current accounting switching’ helps consumers switch banks,” he said.
“But on the other hand, if you can see all your pensions in one place, one of the major reasons for transferring goes away.”
james.fernyhough@ft.com
