Based on figures of employees opting out of the largest auto-enrolment schemes, which are just 10% to date, the DWP is now predicting only 15% of employees in entities of all sizes will opt out. This is compared to its original prediction of 30%.
If the prediction is accurate, 1 million more people will remain enrolled onto work pension schemes due to auto-enrolment than previously thought, taking the total to 9 million.
Hargreaves Landsdown head of corporate research Laith Khalaf warned that official opt-out rates do not tell the whole story and it only tracks people who leave the scheme within a month. He added that to give a more accurate figure it would be necessary to check the figures against total numbers of active pension savers.
Khalaf added that when minimum contributions increase in 2017, the DWP figures may take another hit. For this reason it is important that employees understand why they are saving, as well as how.
"Employers can achieve this by supplementing auto-enrolment with financial education in the workforce," he said. "This way they can explain to members how much they should be putting away for retirement and how to make the most of the savings they have."
Capita Employee Benefits head of DC Gary Smith told HR magazine employees may be lulled into a false sense of security by being enrolled onto pension schemes at low contribution rates. "Employers really need to ram home the idea that you need to have enough in the pot when you reach retirement age," he said.
