Data collected following the first automatic enrolment pension contribution increase in April suggests no spike in opt-outs.
The Department for Work & Pensions today (December 18) published its latest in-depth analysis of the flagship automatic enrolment pension reforms.
Opt-out rates for the 22 to 29 age group were 4.4 per cent for April 2018 to June 2018, compared with 3.9 per cent for 2017 to 2018.
The data showed almost 10 million workers have now been automatically enrolled into a pension scheme as a result of the reforms and opt-out rates among younger savers are particularly low.
However the number of compliance notices issued by The Pensions Regulator has almost doubled, from 34,000 in 2016 to 2017 to 61,000 in 2017 to 2018.
Tom Selby, senior analyst at AJ Bell, said clearly a combination of people embracing the importance of saving for retirement and the power of inertia means the early stages of automatic enrolment have been an enormous success.
Mr Selby said: "Early indications suggest the increase in minimum total contributions introduced in April this year has not caused savers to flee for the exit door. Rising average wages will have helped here, dampening the effect saving in a pension has on people’s take-home pay.
"The next big test of the reform programme comes in April next year when contributions will be hiked once again, from 5 per cent of relevant earnings to 8 per cent.
"The omens for the impact this will have on people’s saving behaviour look positive, although clearly any negative shocks to the economy could yet derail the progress made so far."
Jon Greer, head of retirement policy at Quilter, said the power of nudging and inertia should not be underestimated though as the review shows that rates of opt-outs and cessations have remained consistent, despite the increase.
However, he said there is another increase in minimum contributions set for next year (April 2019) and with economic uncertainty raging rampant, it’s far from clear what the reaction will be.
Mr Greer said: "As we move further down the path of auto-enrolment accurate data will be the most powerful tool.
"Understanding who is choosing not to save and why is important so that the policy can grow and adapt. The latest review shows expected trends, such as the wealthier and the older tend to opt-out."
emma.hughes@ft.com
