Pension opt-outs to hit one million by 2019, HL claims

 
Catherine Neilan
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The future of the workplace pension hinges on the next couple of years (Source: Getty)

The government is estimating that more than one million people will opt out from workplace pensions by 2019, Hargreaves Lansdown claims.

Currently around 10 per cent of people opt out of the auto-enrolment scheme, but the financial group says government figures show "soaring" rates of people dropping out, more than doubling to 21.7 per cent in 2018 and 27.5 per cent the year after. That means more than a million eligible employees will not be putting into a pension pot, rising to 13 million when self-employed and non-eligible workers are included.

Nathan Long, senior pension analyst at Hargreaves Lansdown, said: "The shape of future long term savings policy hinges on the behaviour of workers during in 2018 and 2019. Repairing the retirement savings of UK workers requires more than a quick fix.

"Auto-enrolment has so far boosted numbers saving, but two huge obstacles are looming in the form of contribution hikes in 2018 and 2019. The £18 that someone with full-time average earnings is currently required to spend on pensions each month will jump by £74 to £92 come 2019. All of a sudden this is no longer spare change."

He noted that the models did include eight-year old assumptions, and urged the Department for Work and Pensions to "mothball" anything not currently anticipated.

"Underestimating the number of opt-outs would result in more money going into pensions and the government spending more on tax relief, the bill for which the Treasury would be forced to find from somewhere," he explained.

"Furthermore, plenty of employers would welcome a steer as to future opt-out rates in order to better understand the potential cost increases to their business... An improved understanding of likely opt-out rates would help inform these decisions."

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