16th August 2013
The Pensions Regulator has announced that 1.4 million people have now been automatically enrolled into a workplace pension, and 1600 companies have now met their auto-enrolment obligations.
In a note Hargreaves Lansdown says that this is “so far, so good”, particularly with opt-outs looking encouraging at just one in ten.
The system known as auto-enrolment requires employees to actively opt out of the pension rather than as previously opt in. And if they do so they will receive employer contributions. The reform is being rolled out across the workforce, but it started with the larger employers first at the end of last year and is now set to reach the bigger sort of medium sized firm. Around 38,000 firms and of course their employers will join the scheme next year.
However as Hargreaves Lansdown notes 2.2 million workers have so far been overlooked by auto-enrolment. These are individuals who work for the 1600 companies who have been through the process, but who are too young, too old, or don’t earn enough to be auto-enrolled.
The firm also says that the current level of opt-outs may not tell the whole story. It adds: “Opt-out data only includes those who opt out within a 30 day period after being enrolled. Members who take longer to realise their pay is being diverted into a pension, and subsequently cease contributions, do not count as opt outs. But they still won’t be saving into a pension, so ongoing participation rates need to be monitored to evaluate the success of the auto-enrolment programme.”