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Home Lifestyle Savings surge under auto-enrolment but opt-outs are on the rise

Savings surge under auto-enrolment but opt-outs are on the rise

by Staff GBAF Publications Ltd


  • In August 2022, the optout rate for newly enrolled employees was 10.4%, compared to 7.6% in January 2020.
  • The proportion of people who stopped saving into a pension has remained stable.
  • Annual savings for males within the private sector increased from £29.8bn in 2012 to £40.2bn in 2021.
  • Annual savings for females within the private sector increased from £11.6bn in 2012 to £22.0bn.
  • In 2021, the percentage of eligible employees in the private sector that had total pension contributions at the 2021 AE minimum was 23 ppts higher than in 2012.
  • The percentage with total pension contributions above the 2021 AE minimum was 22 ppts higher.

The DWP has published data on ten years of auto-enrolment Ten years of Automatic Enrolment in Workplace Pensions: statistics and analysis – GOV.UK (www.gov.uk)

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“Ten years on from the advent of auto-enrolment and we have seen savings surge. All occupations have benefitted though the effect on some has been much more marked. Personal service occupations within public admin, education and health have seen participation rates rise from 14% to 86% – enabling many more people to make provision for their retirement years.

Contribution rates have also risen. The percentage of employees with total contributions at the current auto-enrolment minimum (8%) is 23 percentage points higher than it was pre-auto-enrolment. There are also signs many employers are prepared to go above and beyond this with the percentage of eligible employees with contributions exceeding this up 22 percentage points over the decade.

However, there are some flies in the ointment. Opt-out rates have always been low but have crept up over the past year or so. This is likely because of the difficulties experienced during the pandemic and the current cost-of-living crisis. There are no signs of these pressures abating as inflation continues to soar and so care needs to be taken to mitigate further opt outs. 

After a decade of success, there have been calls to put a timetable in place for next steps – most notably the introduction of the measures announced in the 2017 auto-enrolment review – reducing the minimum age to 18 and allowing contributions from the first pound. These measures would undoubtedly strengthen people’s retirement planning further but need to be balanced against current cost pressures which can damage people’s short-term financial resilience.

We recently modelled the impact of these changes using our Savings and Resilience Barometer and we found implementing these reforms would bring a 3.5% increase in long-term financial resilience by the end of 2029. However, this would need to be offset against an immediate decrease in people’s surplus income of 3%, while rainy day savings (3 months emergency savings) would have decreased by 3.3%. Lower income households would be worse hit. These reforms should be brought in but need to be timetabled far enough in advance so that any after-effects from the current cost of living crisis have disappeared.”