13th April 2014
Around nine million pension savers will save for the first time or save more, due to reforms of workplace pensions the Government is claiming.
The Department for Work and Pensions now believes that opt outs from the new workplace pension will only be around 15%, a significant revision from the previous estimate of 30%. This would suggest that the numbers joining workplace pensions will now be £1m than previously forecast.
The DWP says that opt outs among the biggest firms stands at 9% to 10%. Minister for Pensions Steve Webb says: “Automatic enrolment is proving significantly more successful than previously predicted. With opt outs remaining low we now expect 9 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. Ensuring people can plan for their retirement is crucial to building a stronger economy”.
Figures from the Pensions Regulator show 3.2 million have been enrolled into a pension and nearly 11,000 employers have now registered.
The DWP’s research also showed that the percentage of private sector employees who are members of a pension scheme rose from 26% in 2011 to 35% in 2013.
However, others in the pension industry wonder if the DWP is being a little premature in its predictions.
Laith Khalaf, Head of Corporate Research, Hargreaves Lansdown says: “The DWP may be counting their chickens before they are hatched. Early signs from the auto-enrolment programme are encouraging, but much of the heavy lifting still needs to be done.
“In particular as smaller and medium-sized companies start to auto-enrol, opt-out rates may grow. Likewise as auto-enrolment contributions rise above 1% of salary from 2017, employees may start to flinch at more of their pay packet going into a pension.
“Employees therefore need to understand why they are paying into a pension, lest they fall off the savings wagon at the first bump in the road. Employers can achieve this by supplementing auto-enrolment with financial education in the workforce, to explain to members how much they should be putting away for retirement, and how to make the most of the savings they have made.”