The number of employers who reported an automatic-enrolment opt-out rate of between 20 and 29 per cent increased from less than 1 per cent in 2021 to 4 per cent in 2022, Aon UK has revealed.

Aon UK’s latest survey, Benefits and Trends 2022, reported that this increase in opting-out could be attributed to some of the financial pressures of the pandemic as some households saw a reduced income.

The survey also found that whilst there was an increase to 15 per cent of people reporting their opt-out rate was unknown (up from 12 per cent in 2021), opt-out rates remained low as 63 per cent of employers reported opt-out rates of 9 per cent or less.

It was also found that the majority of employers take workplace pensions “seriously” as the survey showed that 72 per cent of respondents operate formal pension scheme governance, 71 per cent have reviewed their pension scheme since 2015, and 89 per cent reportedly review the investment performance of their respective default arrangement regularly.

The survey also revealed the factors that were most likely make members consider changing their pension provider with reducing member charges being found to be the most influential as 30 per cent of those surveyed described it as being the most likely factor to make them change their provider.

Other factors that were found included administration issues (21 per cent described it as most likely), improving online facilities (21 per cent) and investment options (20 per cent).
Introducing in-scheme decumulation options was found to be the least influential factor in changing pension provider and 68 per cent of those survey said it was the least likely to get them to change provider.

Though the survey found that employers offered a variety of pension education methods, such as pension seminars (45 per cent), retirement pension seminars (28 per cent), and access to independent financial advice (20 per cent), it was revealed that 37 per cent of employers offer no financial education at all.

Aon UK workplace pensions technical lead, Adam Burn, commented: “Putting additional flexibilities in place is a vital first step.

“Employers need to ensure that employees are aware of these different retirement planning options to allow them to reduce or enhance their contributions in line with what they can afford.

“It is important that both short- and long-term planning is front of mind, empowering people to free up cash today, without compromising their long-term pension pot.

“In that context, it’s a concern that our Benefits and Trends survey showed that 37 percent of employers still don’t offer any financial education. Even more worrying was that it represented an increase from 35 percent in 2021.”

The current cost-of-living issues need UK employers to consider more flexibility for pension scheme members, allowing them to manage their finances to meet short-term needs, Aon has warned.

Aon UK workplace pensions and financial wellbeing, Martin Parish, stated that rising inflation is “testing the financial resilience” of households and individuals, many of whom have also faced reduced income over the last two years.

Parish continued that people have been facing cost-of-living issues that have been unseen for decades and they are having to make difficult decisions on how best to spend their money and, therefore, some may be tempted to cut back on saving to free up cash and, inevitably, one area many are likely to look at will be their pension contributions.

Parish additionally advised that employers should provide information and education about the implications of pension contribution flexibility, with eth aim of helping employees make better decisions.

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