UK: Advisers predict high levels of auto-enrolment 'opt outs' in younger workers

06 Feb 2012

  • "Here and now" takes priority over long term planning 
  • Workplace pensions still viewed as the best way to save for retirement
  • 98% of corporate advisers expect some degree of withdrawal from auto-enrolment 
  • Most advisers state that they are actively encouraging saving in the workplace.

More than half of corporate financial advisers think that up to 30% of UK workers could opt out of the government’s new auto-enrolment regulations due to be introduced from October 2012.

Independent research* from Aviva shows that the majority (98%) of corporate advisers expect some degree of withdrawal by employees from workplace savings schemes they would automatically be enrolled into. 20% predict that half of all employees will opt-out, a further 59% forecast that there will be up to a 30% drop out rate, while only 2% expect there will be no drop out. Most worryingly though, half of all corporate advisers think that the largest proportion of opt outs will be in the 35 and under age group.

The research highlights the importance of engaging employees on the benefits of saving in the workplace early, particularly amongst younger workers, many of whom will be saving into a pension for the first time.

Key research findings:
Of the top five reasons advisers gave as the main barriers to saving amongst the 35 and under age group, the largest proportion (80%) say they don’t think younger workers can afford to save, while:

  • 72% say that they have other financial priorities
  • 69% believe that they think they are too young to worry about their retirement
  • 63% don’t think they trust pensions 
  • 47% say that they don’t think the younger employees understand the benefits of a workplace pension compared to other kinds of saving.

Most attractive options on offer
However, more than half (55%) of corporate advisers believe that a company pension scheme is still the most attractive way for younger workers to save. A further 34% identify other savings vehicles such as ISAs and share schemes (either offered by their employer or set up privately), as the next most popular mode to saving for the long term. 2% suggested a compulsory pension scheme could be the way forward.

The widespread view amongst advisers is that younger workers live in the "here and now" and have other things to worry about at the moment, a view that is echoed by this age group themselves, whose main current financial goals are to buy a house (36%); pay off debts (34%) and pay off their mortgage (20%)**.

Closing the gap
Regardless of there being some way to go in convincing workers that this is the case, four out of five advisers believe they are actively doing something specific to encourage younger workers to save in the workplace, through the provision of information on the benefits of a pension scheme (58%), offering financial planning sessions (55%), or actively encouraging communication between clients and employees (40%).

Aviva’s director of workplace savings Paul Goodwin said: “Our work with our customers and advisers indicates that 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 minimised.

“It’s good to hear that four in 10 (40%) advisers are actively trying to stimulate open communications between their clients and their employees but, more must still be done to minimise the predicted level of opt out figures. It is apparent that there is still quite a gap between the information that is given to clients and what employees actually feel they receive. 

“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.”

In separate research**, Aviva found that only 14% of 25-35 year olds have received any data from their employer about the benefits of a workplace pension scheme, and just one in seven (15%) have access to financial planning sessions.

When asked about their attitude to savings, the main reasons younger workers gave for not saving into a workplace pension were that they could not afford to pay into one (20%), or they worked for someone who didn’t offer one (19%). Only 3% believe that they are too young to worry about their retirement, and a similar number (4%) say they don’t trust pensions. Encouragingly, over a quarter (26%) want to save into some sort of pension within the next five years, with the majority (84%) looking for support and information from their employers or financial advisers.

Aviva is one of the leading providers of workplace pensions in the UK. As well as having a dedicated corporate sales team, it has online educational guide for advisers through its "Aviva for Advisers" portal (www.aviva-for-advisers.co.uk), as well as a central online hub for employers (www.aviva.co.uk/auto-enrolment), which provides comprehensive details/ Q&A’s about workplace pensions.

Methodology: 

* Survey was conducted online by ICM Research between 16-24 January 2012. 200 independent corporate financial advisers, all of whom had at least some of their business in workplace savings market, took part in the survey. The sample was sourced principally from ICM’s Adviser Panel and was made up of and supplemented by Aviva’s own contact list of Group pension providers.

** Data was sourced from over 2,200 people in November 2011 as part of a UK representative sample interviewed using Wriglesworth Research, which is registered with the ICO.

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If you are a journalist and would like further information, please contact:
Fiona Robertson
Aviva Press Office
Telephone: +44 1904 452659
Mobile: +44 7800 692299
Email: fiona.robertson@aviva.co.uk

Diane Mangan
Aviva Press Office
Mobile: +44 7800 691714
Email: diane.mangan@aviva.co.uk
          
Notes to editors:

About Aviva

Aviva is the world’s sixth largest* insurance group. We provide 44.5 million customers with insurance, savings and investment products with total worldwide sales in 2010 of £47.1 billion**.

We are the UK’s largest insurer with over 14 million customers. Our combination of life, health and general insurance is unique in its scale and breadth in the UK market.  Customers can choose to buy our products through intermediaries, our corporate partners or from Aviva direct and we have become the partner of choice for many of the UK’s biggest organisations.  

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* based on gross worldwide premiums at 31 December 2010.
** at 31 December 2010.