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Aviva: third of employees to opt out of auto-enrolment

by Daniel Grote on Feb 27, 2013 at 09:12

Aviva: third of employees to opt out of auto-enrolment

A third of employees plan to opt out of auto-enrolment, despite growing awareness of the government’s reforms to pensions, a report from life company Aviva has found.

Aviva’s second Working Lives report has found that plans to opt out have remained at the same level as when its first survey was conducted in May 2012, at 37%. Around a quarter said they were undecided.

That is despite employee awareness about auto-enrolment almost doubling to 59%. Around half of employees who do not contribute to a workplace scheme they are offered said they could not afford to, one in five said repaying debts prevented them and 17% said they were saving for other things, such as a house or a holiday.

Mark Noble, Aviva managing director of health and corporate benefits, said: ‘Automatic enrolment will only become game-changing if employers, their advisers and the wider industry create sustained communications and engagement in the workplace to encourage employees to save.’

10 comments so far. Why not have your say?

Bob Donaldson

Feb 27, 2013 at 09:35

For some people it is a case of keep the roof over your head, keep the lights on or go into a pension scheme. No brainer for them opt out.

For the others, it is a case of pensions have got such a bad name that they don't trust them.

For the rest it is a case of can't be bothered!

Pensions for the bottom run of the ladder need to be sold highlighting the ineptitude of the current state system.

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Feb 27, 2013 at 09:49

Many people in this target market simply need to pay bills today to survive so saving in a pension for tomorrow is not high on their priority list. A lot of people simply just don't get this point but most of them have been employed in the public sector for decades with their extremely generous and expensive final salary pensions.

Furthermore with all the constant tinkering of pension rules on an annual basis since "Pensions Simplification Day" almost 7 years ago now, the attractive option of buying an annuity at the end or using a pension drawdown plan with further ever changing regulations, combined with inappropriate comments from MP's about high charges, is it any wonder people don't trust pensions. One reason (albeit not the only reason) is the cost of the regulator which is a beast that gets hungrier by the day and demands to be fed or else hellfire and damnation will descend upon the firm that refuses or cannot feed it.

So if we drill down to some of teh real reasons, it is because MP's keep b*ggering about with rules so none of us can really plan, advisers need to protect themselves with 30 pages of caveats otherwise they are at fault and get to remimburse the investor fully with interest, and we all need to work for peanuts to keep the costs at a minimum for the investor yet run a profitable businss to satisfy the out of control and out of touch FSA/FCA or any other regulatory authority.

I really wonder what magic fairy dust is pumped through the air conditioning in Westminster sometimes.

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Feb 27, 2013 at 09:49

Be interesting to see if what actually happens tallies with this research. Thus far opt out rates have been lower than I personally expected but then I do attribute much of this to inertia.

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David Trenner - Intelligent Pensions

Feb 27, 2013 at 09:52

Bob "For the rest it is a case of can't be bothered!"

That is what the government is banking on with a/e - and I think it will work. A third are thinking of opting out, but only a few of these will get round to doing so.

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Christopher Petrie

Feb 27, 2013 at 10:26

The opt-out rate so far is 10%. This is what's actually happened - these "surveys" are totally pointless and almost never tell anyone anything that happens in practice anyway.

To my mind, it's great news that people in low-paid jobs now get the right to an Employer pension contribution (so long as they make pay a share too).

A very small client of ours is working for Morrisons in the filling station store (not at all HNW!). She wanted to put £30 per month into a PPP last year. With the best will in the world, that amount wouldn't make a dent in any serious retirement planning, of course. I advised her to wait a few months and join the scheme that Morrisons would be forced to set up - which she has now duly done.

Suddenly, this low-paid lady enjoys a pension contribution from her company for the first time in her life, which when added to her own payment will one day provide at least some reasonable chunk of what income she may need in retirement.

As for IFAs - millions of future new clients will be starting their first pension funds over the next few years....one day many of these will have quite significant sums of money in them and the owners will be wanting our advice on how to take benefits. Good news all round.

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Philip Stevenson

Feb 27, 2013 at 11:45

Biggest problem is that NEST is in reality a government 'sponsored' scheme. Now be honest would you trust the Government with your pension scheme.

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Feb 27, 2013 at 11:54

We also have the issue that AE was designed for the industry not the public...in my opinion.

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Feb 27, 2013 at 12:01

How many of those who just want to keep a roof over their head have Sky? How many times do they get a takeaway? How much do they spend on fags, booze and clubbing?

Whilst there will be a few who genuinely are struggling, there are many more who are opting out because they cannot manage their finances properly.

When I was originally trained on how to 'sell' pensions, I had to disturb them. If you don't want to pay in, what will you give up in retirement? your home? Any holidays? Heat?

Maybe the government needs to disturb the younger age group by a series of ads on the telly that shows just how little a standard state pension will buy. How borrowing to but a flat to rent is not always the answer, but can be a millstone. How living for today can mean no life in the future.

Also make employers show the cost of the pension to their take home pay explicit. Percentages often sound a lot, but if you take tax relief out, it does not look so bad.

Also let them ban downloading an app to opt out, make them fill in a form longhand, that will reduce the numbers significantly.

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Feb 27, 2013 at 20:59

Hickky, any of those can go so long as the mobile phone stays.

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phil castle via mobile

Feb 28, 2013 at 07:18

@ Chris Petrie, don't fall over in shock but for once I actually agree with you! From personal experience of operating GPPs where there is an employer contribution and a good IFA presentation to staff, opt out rates evenBEFORE AE for us were under 10%, no employer contribution not ooting in stakeholder were massive. If an employer in AE engages an IFA to do presentations, then opt outs should always be under 10% as only those with hi rated debt should opt out of an employer contribution on the whole.

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