The real story on auto enrolment opt outs
Opt-outs from auto-enrolment schemes have been lower than industry expectations. Initial projections ran at around 30 per cent, yet experience to date has shown figures of less than 10 per cent on average. Nest reports an opt-out rate of just 8 per cent. As a result, the Department for Work and Pensions has revised down the net projected opt-out rate across all employers from 30 to 15 per cent.
However, given where opt-out rates are currently, this new projection suggests SMEs will actually see an increase. In fact, based on Nest’s experience to date, the DWP’s projections would represent a doubling of opt-out rates when smaller firms begin to stage in earnest.
Higher employee contribution rates from October 2017 will mean 3 per cent employee contributions are followed shortly by 5 per cent contribution rates, creating immediate affordability issues. It is unfortunate that those least likely to have had access to a pension to date may be presented with a greater “pay slip shock” than those who work for larger companies and have had time to get used to 1 per cent contribution levels.
To read this article by Tom Nall, Workplace Solutions Director of the SimplyBiz Group, in full, please click here