Huge discrepancy in industry opt-out rate projections

Wide discrepancies are emerging between projections for opt-out rates across employers of all sizes and rates for the few big employers who have already staged.

More than one in three employees will opt out of auto-enrolment, with 28 per cent undecided, according to research carried out by Aviva.

But figures from Legal & General show that less than 10 per cent of employees have opted out of the few schemes it runs that have staged and passed the three month opt out window.

Aviva’s research, of more than 4,000 private sector employees across over 700 employers, found 45 per cent of those currently not taking up pension offered to them do so because of affordability.

L&G says evidence from early stagers does not reflect its own consumer surveys that showed a 33 per cent opt-out rate.

Aviva managing director health and corporate benefits Mark Noble says: “Automatic enrolment will only become a game-changing if employers, their advisers and the wider industry create sustained communications and engagement in the workplace to encourage employees to save.

“It’s about understanding the needs and the circumstances of the actual employees in each business, not as a single group but in an individual way through face-to-face conversations and personalised planning tools.”      

Legal & General managing director, workplace savings Tony Filbin says: “Over 90 per cent of eligible staff in the schemes that have completed staging chose to remain in their company pension, a solid endorsement of the quality of the schemes offered.

As our research predicted, those in the 30 to 40 age group are showing the lowest number of members who opt out from their first premium with over 50s returning the highest opt out rate.”          
Nest chief executive, Tim Jones, says: “There is no doubt that times are tough for many people, and overcoming concerns around affordability will be key to the success of automatic enrolment.
“While surveys among different groups of consumers will no doubt provide a range of results, it will be interesting to see how opt out works in reality as more people are enrolled over the next few years.”
Michael Whitfield, chief executive of Thomsons Online Benefits says: “The findings from Aviva in the excellent 2ndedition of their “Working Lives” series, based on an employee population of 4000 and an employer population of 760, appear to be far more comprehensive, and the outcome in my opinion more accurate and credible than anything that has come out so far, so it does not surprise me at all that about two thirds of people will seriously consider opting out, and probably will opt out.
“I think auto enrolment has promised long and will deliver short and without compulsion the Government have clearly missed a trick, leaving us with a confusing, complex and increasingly endangered pension initiative, which may well end up in the pension junkyard along with Stakeholder Pensions and the Contracting Out Of Serps initiative. I sense some big U turns coming our way soon.
“Will the government relax the assessment process in order to make it much easier to assess for the vast majority of companies that stage in 2014 and will they further delay staging post 2014 and possibly post the 2015 general election – or am I too cynical?”