Many younger workers expected to opt out of auto-enrolment in U.K.: Survey

Workplace pensions still viewed as best way to save for retirement
||Last Updated: 02/07/2012

More than one-half of corporate financial advisers think up to 30 per cent of workers in the United Kingdom could opt out of the government's new auto-enrolment regulations, due to be introduced in October 2012 for bigger firms. (The deadline for firms with fewer than 50 employees who are not already members of their company pension plan is May 2015.)

Most (98 per cent) corporate advisers expect some degree of withdrawal by employees from workplace savings schemes they would automatically be enrolled into, found a survey by Aviva, provider of workplace pensions.

One-fifth predict one-half of all employees will opt out, a further 59 per cent forecast there will be up to a 30 per cent dropout rate, while two per cent expect there will be no dropouts. However, one-half of all corporate advisers think the largest proportion of opt-outs will be in the 35 and under age group, found the survey of 200 independent corporate financial advisers.

The top five reasons advisers gave as the main barriers to saving amongst the 35 and under age group are:
•80 per cent don't think younger workers can afford to save
•72 per cent said they have other financial priorities
•69 per cent said they think they are too young to worry about their retirement
•63 per cent don't think younger workers trust pensions
•47 per cent said they don't think younger employees understand the benefits of a workplace pension compared to other kinds of saving.

However, 55 per cent of corporate advisers believe a company pension scheme is still the most attractive way for younger workers to save, found Aviva.

"There is already a lot of consideration being given to planning for auto-enrolment but, at the same time, more thought still needs to be given to how we engage with employees so that opt outs are minimized,” said Aviva's director of workplace savings Paul Goodwin. "It's up to us as an industry to work alongside the pensions regulator to not only ensure the successful implementation of automatic enrolment, but make sure that employees know the options available to them, the benefits of a workplace scheme and what the consequences of opting out will have on their future lifestyle."

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