Give pension opt-outs 'lost contribution' statements, think-tank urges

Workers who opt-out of their workplace pension should receive regular statements detailing what the accumulated value of their pension pot would have been worth had they stayed in, a think-tank has suggested.

The Strategic Society Centre said the statements could encourage workers to opt back into occupational schemes.

Workers who want to opt-out, and for whom auto-enrolment will be their first experience of pension saving, should also be offered a temporary, one-off ‘stepping stone pension’, the think tank said. This would allow these individuals to familiarise themselves with pension saving and could be cashed-in during the first six months, after which time it would be uprated into a full pension.

Department for Work and Pensions figures published last year showed more than 1.9 million workers were automatically enrolled in the 12 months to October 2013, across nearly 3,000 employers. An average opt out rate of 9 per cent was reported among the first tranche of employers.

“We have always known some workers would opt-out of their workplace pension after being automatically enrolled,” Strategic Society Centre director James Lloyd said.

“The government now needs to develop additional measures for encouraging saving among workers who reject their employer scheme, even when employer contributions are available. The government should ensure workers opting out of their employer contributions are given regular statements setting out the contributions they have missed out on, and what their accumulated pot would be worth.”

Prudential’s head of UK public affairs Tim Fassam said relying on the state pension alone “will see many people retiring below the poverty line”.

“Virtually everyone with the option of a company pension should take advantage of that, and the tax relief and employer contributions that go with it. When combined these often come to more than double the amount of pension contributions the employee has to make.”

    Share Story:

Recent Stories

New
New
New

The modern age
Deputy editor Natalie Tuck chats to the ABI’s Yvonne Braun about her work at the ABI and her thoughts on key pension topics

Stepping into the spotlight
Laura Blows speaks to Laird R. Landmann, group managing director and co-director of fixed income at US-based TCW, about the opportunities TCW can provide for UK pension funds