Opt-out rates at the end of June 2018 “remained consistent” with levels before the April contribution rate increase, according the Department for Work and Pensions (DWP).
The number of people leaving their pension scheme rested at around the 9% level recorded in the government’s auto-enrolment (AE) review, published this day last year. The report had predicted this would rise to around 22% between April 2018 and March 2019, and approximately 27% from then on, based on “conservative assumptions”.
In April, minimum contributions rose from a total of 3% to 5%, with 2% minimum employer contributions. Next April, contributions will rise to a total of 8%, with 3% minimum employer contributions.
The DWP’s AE evaluation report 2018 unveiled today (18 December) revealed that, generally, older age groups had higher opt-out rates, but those aged 22 to 29 and 60 to State Pension age were more likely to stop saving into a pension.
It further showed that approximately 5.9 million eligible employees were already meeting the April 2019 minimum contribution rates, based on data from April 2017. More than 92% of eligible employees in the private sector contributing between 3% and 4% received a matching, or higher, employer contribution rate.
However, around 5.1 million eligible employees were still contributing below April 2018 minimums at that time, and around 6.1 million will have to increase their contributions by April 2019, if not earlier.
The analysis found that, in 2017, over seven million eligible private sector employees saving into a workplace pension received an employer contribution of 2% or above. Of these, 5.5 million received an employer contribution of 4% of above.
Royal London director of policy Sir Steve Webb said the report offered a “rare glimmer of hope” despite “doom and gloom” in pensions more generally.
“The amount of money going in to pensions through AE is up over £4bn in a year and the April 2018 step-up in contribution rates has done nothing to put people off pension saving,” he said.
“Even where people opt out, over half a million have now been automatically ‘re-enrolled’ which will reinforce the message that saving in a pension is the normal thing to do when you have a job.”
Other DWP findings
- Since the start of AE, more than 9.9 million workers have been enrolled across 1.4 million employers. 591,000 workers have been re-enrolled across 73,643 employers.
- The number of compliance notices issued by The Pensions Regulator (TPR) has risen from nearly 34,000 in 2016/17 to nearly 61,000 in 2017/18, however this is broadly in line with the increased number of employer declarations of compliance TPR received. The majority of employers subsequently complied when they were reminded of their duties.
- At least 93% of micro-, small- and medium-sized employers were aware of their AE duties
- Virtually all medium and large employers (97% and 99% respectively) and the vast majority of small employers (84%), had enrolled employees by late 2017.
- In 2017, just under half (47%) of employers currently had some form of workplace pension provision, up from 19% in 2013. These organisations employed 91% of all private sector employees.
- Data collected up to 2017 found that the number of eligible employees participating in a workplace pension has increased to 17.7 million (84%), up from 10.7 million (55%) in 2012.
- The annual total amount saved by eligible employees stood at £90.3 billion in 2017, an increase of £4.3bn from 2016.