Just one in ten employees opt out of automatic enrolment

22 Jul 2014 10:51 AM

Just one in ten employees opt out of automatic enrolment 

Findings from a new report commissioned by the Department for Work and Pensions indicate that around one in ten employees opted out of automatic enrolment in the first tranche of organisations subject to the workplace pension reforms.

The reforms require employers to automatically enrol all eligible workers into a workplace pension scheme, although workers may choose to opt out. Employers are also required to make a minimum contribution into the scheme. The new duties were introduced for the largest employers in October 2012 and will apply to all sizes of employer by April 2017.

The new report presents the findings from a nationally representative survey of private sector employers carried out jointly by the National Institute of Economic and Social Research (NIESR) and TNS-BMRB Social Research. The 2013 Employers' Pension Provision survey (EPP 2013), is the tenth in a series of surveys, and the first since the introduction of the workplace pension reforms.

According to the report:

• The percentage of employees who had opted out, or left, a scheme after being automatically enrolled was between 9 and 10 per cent. The rate was lower among occupational schemes (6 per cent) than among non-occupational schemes (12 -14 per cent).
• The average employer contribution received by members in automatic enrolment schemes was seven per cent (nine per cent in occupational schemes, six per cent in GPP schemes and five per cent in SHP schemes). However contributions are expected to be lower, on average, among those employers who have not yet begun automatic enrolment.
• Three fifths (61 per cent) of automatically enrolling employers judged that the reforms had led to an increase in their total pension contributions. The most common responses to deal with any increase were to absorb this through an increase in overheads (84 per cent) or through a reduction in profits (64 per cent).  One quarter (26 per cent) of employers judged that the reforms had resulted in an increase in their administrative costs.
• Employers who had not yet passed their staging date were asked about their state of readiness for the reforms. Among this group of employers, three-quarters (77 per cent) had "not done anything" in preparation for the reforms. One fifth (19 per cent) had "begun planning but not implemented anything"; two per cent had "completed planning and were starting to implement" while two per cent had "fully implemented plans".

Lucy Stokes, co-author of the report, said that, "These findings paint a fairly positive picture of the workplace pension reforms so far, with only a small proportion of employees choosing to opt-out of automatic enrolment and relatively favourable contribution rates from employers. However, we may well expect to see more employees opting out and lower contribution rates as the reforms roll out to other employers."

ENDS

Notes for Editors:

1.         The report

 

The findings from EPP 2013 are reported in DWP Research Report No. 881 “Employers' Pension Provision Survey 2013”, written by John Forth and Lucy Stokes, both of the National Institute of Economic and Social Research (NIESR), and Catherine Grant and Sam Sullivan, both of TNS-BMRB Social Research.

 

The survey and report were commissioned by the Department for Work and Pensions (DWP) and can be downloaded at:

https://www.gov.uk/government/publications/employers-pension-provision-survey-2013

 

The report containing the preliminary findings from EPP 2013 was published in April 2014 and is available at:

https://www.gov.uk/government/publications/employers-pension-provision-survey-2013-preliminary-findings

 

2.         Contact details for authors

John Forth, Principal Research Fellow, NIESR

Contact details: j.forth@niesr.ac.uk or 07815 906118

Lucy Stokes, Senior Research Fellow, NIESR

Contact details: l.stokes@niesr.ac.uk or 07941 514396

3.         The workplace pension reforms

Under the Pensions Act 2008, employers are required to automatically enrol all eligible workers into a workplace pension scheme, unless the worker chooses to opt out. Employers are also required to make a minimum contribution into the scheme. The new duties were introduced for the largest employers in October 2012 and will apply to all sizes of employer by April 2017. New businesses created after 1st April 2012 have additional time to comply.

4.         The survey

EPP 2013 was conducted among a nationally-representative sample of 3,079 private sector employers in Great Britain. EPP 2013 was the tenth in a biennial series which began in the mid-1990s. The main aim of the EPP survey is to ascertain the extent and nature of pension provision among private sector employers. EPP 2013 was the first in the survey series to have taken place since the introduction of the workplace pension reforms. A substantial part of the 2013 survey therefore focused on the early impact of the reforms, as well as intentions among those yet to be directly affected.

Fieldwork took place between June and November 2013 when organisations with 800 – 4,999 employees were passing their staging dates for implementing automatic enrolment.

Two per cent of private sector organisations had passed their staging date (the date from which they are required to comply with the reforms)  at the time of the EPP 2013 interview, and one per cent had begun to automatically enrol employees into a workplace pension scheme. This latter group of organisations accounted for around one quarter (26 per cent) of all private sector employment