How many people will start saving in pensions because of the new policy of auto-enrolment which kicks off on 1st October?
And how many will exit the scheme as soon as they have the chance?
Remember, it's a staggered start. Only companies with over 120,000 staff have to sign up their staff from that date. Other firms will be included, gradually, over the next 5 years.
Steve Webb, the Pensions Minister, expects that 600,000 employees will be on board by Christmas. That's after at least 200,000 have opted out.
His department, the DWP, projects that 4.3m more people will be saving by May 2015, just before the next election.
Eventually, 11m will be auto-enrolled. Mr Webb thinks between 6m and 9m will stick with it and carry on saving for a workplace pension.
In percentage terms, those figures imply that between 18% and 45% might withdraw, which is a big range.
The point is that everyone who is forcibly enrolled in a workplace pension from next month has the right to opt out. They stop building up the pension, but they don't have to make the monthly payments.
And one of the big questions hanging over auto-enrolment is how many will do just that. If it's too many, the policy will look like a failure.
Which is why it makes good political sense for Mr Webb to talk conservatively about a fairly large opt out rate of 33%, when he is asked what will happen. It reduces the scope for disappointment.
What does he think would be a good overall outcome?
The Pensions Minister responds that if 7.5m stay enrolled, or just over two thirds, he'd be happy.
I suspect a lot more than that will withdraw. A lot of people find it enough hard to financially support their current existence as it is.
ReplyDeleteI think you may be right. 40% appear to have withdrawn at RBS already, though there are special reasons for that.
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