There are still potential problems on the horizonby Andy Davis / November 18, 2015 / Leave a comment
Early indications suggest that automatic enrolment of employees into workplace pensions has proved more successful than many had anticipated, with the proportion of people exercising their right to opt out some 30 percentage points lower than the assumptions that the insurer and asset manager Legal & General used in its modelling, Group Chief Executive Nigel Wilson told a round table discussion organised by Prospect at the House of Commons on the 10th of November 2015 to discuss how auto-enrolment can help those that need it most.
However, even though more than 90 per cent of those automatically enrolled into their employer’s scheme were choosing to stay in, Mr Wilson argued that a series of challenges remained in order to finish the roll-out of the system and to ensure that people are saving enough and protecting themselves against a wide enough range of risks. Several speakers agreed that while the initial phase had gone well, this resulted from factors that would not necessarily apply in future.
One of the major reasons for the successful roll-out so far, argued Henry Tapper, editor of Pension Playpen, was that it had included only the largest companies, which had strongly supported the project. “One of the weaknesses going forward is an expectation from small employers that all this will happen for them and that there is no cost attached,” he said. “The idea that there are 1.8m [small] employers out there that are going to play ball—that’s a bad assumption.” The progressive roll-out of auto-enrolment to smaller business is just beginning, although Mr Wilson said L&G’s data indicated that opt-out rates among employees in these firms were even lower than in larger companies.
Several speakers, however, pointed out that the very low rate…