Auto-Enrolment

The first meaningful report on the numbers of workers opting-out of the Governments new compulsory pension scheme by the Insurance broker, Jardine Lloyd Thompson, and they are broadly good news for the Government.

With the scheme all workers must be enrolled but then the workers can opt-out but only 10% are presently doing so against some official estimates that up to 35% would do. This would indicate that the scheme is finding favour with workers but it is still early days and only large employers are within the scheme at present. Smaller employers will have a staging date for the scheme going into 2017. Some individual employers have published their opt-out rates and these vary greatly from 8% up to 40%.

The contribution rates from the employee are set at low levels at present and will increase over time. Therefore with these starting at 1% employees are not seeing a drop in income levels it will be interesting to see opt-out levels when contributions are higher. Does the opt-out rate show support for the policy or ‘inertia’ effect? Will it take workers to see a real drop in income before they take action?

If employers have not taken any actions they will need to know when their staging date is and start preparations 18 months before that date and start to consider the additional business costs.