Warning 1 in 20 workers short-changed on pensions

During the coronavirus crisis there were concerns that many employees would chose to opt-out of their workplace pensions or reduce their contribution levels, effectively reducing their retirement funds.

To avoid this, at the beginning of lockdown TPR warned employers against encouraging savers to opt out of auto-enrolment.

The regulator said even though staff may choose to reduce their contribution levels or opt out of the pension scheme altogether in order to save on outgoing costs during the crisis, employers must not encourage this and should continue to carry out their obligations under the existing pension scheme rules.

For those that have chosen to opt out, the Work and Pensions committee urged TPR to consider helping such workers re-enrol sooner than the current three-year timeframe under auto-enrolment rules to protect their pension pot.

On the contrary, the Institute for Fiscal Studies has previously suggested savers on the lowest of incomes should opt out of their auto-enrolment pension on a temporary basis to build up a rainy day fund.

According to the IFS, circumstances in which it could be more beneficial for employees to leave a pension scheme included having high current spending needs or low standards of living.

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