The Government has dramatically cut its prediction for the number of employees opting out of Automatic Enrolment.
Over the course of the next few years, all employers will have to automatically enrol any workers over the age of 22, who earn more than the weekly or monthly equivalent of £10,000 per year. Employees can choose to opt-out, reducing their pension in retirement.
Estimates of opt-out rates have varied considerably.
Initially the Government predicted 30% of employees would opt-out over the lifetime of the reforms. But in a dramatic move, this has been slashed to just 15%, suggesting the reforms will be a success, with more employees than expected taking advantage of the opportunity to build up a pension pot for retirement.
The drop in the predicted opt-out rate, comes after a survey by the Department for Work & Pensions, which revealed the latest Automatic Enrolment facts and figures:
- So far 3.2 million people have been automatically enrolled into a pension, with 11,000 employers now past their Staging Date
- The percentage of private sector employees in a pension has risen from 26% in 2011 to 35% in 2013
- Only 1 in 10 employees have chosen to opt-out after being automatically enrolled into a workplace pension
- Overall around nine million people will save for the first time towards retirement or will increase their contributions as a result of the reforms
Employers in the dark
Despite the millions of people now saving more for retirement the survey also revealed that some employers are still in the dark over the reforms:
- Amazingly, despite the raft of publicity, 25% of forms questioned were still not aware of the need to Automatically enrol their staff into a workplace pension
- Only 41% of employers are aware of the current minimum contribution levels
Responding to the findings, Minister for Pensions Steve Webb said: “Automatic enrolment is proving significantly more successful than previously predicted. With opt outs remaining low we now expect nine million people will be newly saving or saving more as a result of our reforms.”
“Our reforms to pensions are working and have already proved a success. Now this is an extra million savers who will be helping to secure a better future for themselves and their families.
He concluded: “Ensuring people can plan for their retirement is crucial to building a stronger economy.”
Budget boost to Automatic Enrolment?
Although the news came too late to affect the DWP survey it is of course possible that the proposed changes announced in March’s Budget, which will see people get greater access to their pension fund in retirement, will give Automatic Enrolment a boost.
One of the criticisms often levelled at pension is that access was restricted to just 25% of the pot. It now looks as this rule will be changed from April next year and with the promise of greater access it is possible more people will be happy to commit money from their wage packet to a pension.
Are you in the dark about Automatic Enrolment? We’re here to help
We’ve developed a four stage process to ensure your business is compliant by your staging date and sticks to the rules in the months and years to come.
- Would like to know your staging date
- Have a question about Automatic Enrolment
- Would like to know how you can comply with the new rules
Then get in touch today, to put it bluntly, this problem isn’t going away and your staging date is only getting closer.
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