Auto-Enrolment ‘Breeding Neglect’ As 1.5m Workers Ignore Pension Savings

Research also reveals that 10% of private sector workers opt out of a workplace pension, with 32% of these citing financial constraints.


Close to 1.5 million pension savers have no idea what fund their workplace pension has been allocated to or fail to monitor their investment, according to a new report from one of the UK’s leading personal pension providers.

The shocking figure represents 15% of all private sector employees, up from 9% at the start of 2013, as experts warn that “every effort” should be made to provide people with appropriate support and pensions advice.

This figure rises even further among small business employees, with almost one in five (19%) neglecting their pension savings.

The new report from Aviva – ‘Working Lives’ – shows how 1,468,050 private sector workers are unaware of or are ignoring their pension fund choices. Aviva warns this could rise further in coming months, with 480,000 small and medium size businesses starting auto-enrolment this year.

The report also shows that fewer employees are seeking financial advice before making investment choices. Only 4% of employees sought financial/pension advice in 2015/16, compared to 7% three years earlier.

Almost 9.8 million private sector employees are enrolled in a workplace pension scheme, with almost 93% of these agreeing the process had been straightforward.

However, approximately one in five private sector employees (20%) say their employer hasn’t explained auto-enrolment in a way they could understand, up from 12% in 2013. Less than half of all employers (47%) believe it is their responsibility to explain how auto-enrolment works to their employees, falling to only 33% amongst small businesses.

Unaffordable

An estimated 10% of automatically enrolled workers are believed to have chosen to opt out, with 32% of these citing “financial restraints” as the main reason not to pay into any company pension.

According to Aviva’s analysis, there has also been an increase in the number of people not paying into a workplace pension because they believe it is “too late to start saving”, including 13% of those aged just 25-34, up from 15% in 2013 to almost one in four (24%) in 2016.

A growing number of people are also opting not to contribute to a company pension because they would rather keep the money to fund their ‘lifestyle’, up from 15% in 2013 to 19% in 2016.

Andy Curran, Managing Director, Corporate & Business Solutions at Aviva, said: “Auto-enrolment has transformed the savings landscape for millions of private sector employees and considerable momentum has been built to date.

“It is clear there has been substantial support and businesses of all sizes should be proud of how well received the changes have been.

“That said, the Working Lives findings highlight that we cannot be complacent and that the auto-enrolment journey does not end once employees start contributing.

“It is vital employees engage with the processes behind their pension.

“We must continue to make every effort to ensure people have all the support they need to make the most of their pension provision.”