By Marcus Leach
Government plans to reform workplace pensions in the UK could be in for a rocky ride, industry experts are warning.
The changes, which will see employees automatically enrolled into pensions
schemes, are set to begin in 2012 and will be implemented over a four-year
But millions of workers are likely to opt out of auto-enrolment, according
to a survey carried out on behalf of the National Association of Pension
The NAPF is regarded as the leading voice in the UK pensions industry,
speaking for some 1,200 pension schemes with a combined membership of around
15 million employees.
Based on survey findings, one in three workers are liable to look elsewhere
for pension provision rather than stay in the scheme they'll be
automatically enrolled into. That could amount to 3 million workers.
Nearly half of those who indicated they would opt out said the reason for
doing so would be the cost of the contributions. Just under a third said
they did not trust the government, while slightly over a quarter cited a
lack of trust of the pensions industry itself.
Last month, at its annual conference, the NAPF announced it was setting up a
summit of consumer groups, industry leaders, employer bodies and employee
groups to look at pension fees and charges which it sees as a major obstacle
to the success of auto-enrolment.
NAPF chief executive, Joanne Segars, warned people were wary of pensions and that was a big threat to auto-enrolment.
“We’re alarmed that so many say they’ll reject the new deal,
and the picture has got worse since the recession. Our society is
sleepwalking into a crisis because it isn’t saving enough for its old age,
and auto-enrolment is meant to be a big wake-up call," she said.
“But there’s no point in bringing people into a pension if their savings
are going to be eaten away by fees and charges which they can’t
understand. They’ll simply walk away. The pensions industry has to be much
more upfront about what it is doing. People need information about their
pension in a form they understand. That means pounds and pence, not basis
points and unit prices.
“With auto-enrolment just around the corner, the industry needs to do more
to help people engage with their pension. The summit will help forge a clear
direction on transparency and communication.”
The figures form part of an annual confidence survey undertaken by the NAPF
which suggests public confidence in pensions is at an all-time low.
Just under half of those surveyed said that compared to other ways of
saving, they were not confident in pensions. By comparison, 42% said they
were confident. This meant a pension confidence index of -6%, the first dip
into negative confidence in the index’s four-year history. The index stood
at +11% in 2009 and at +5% in 2010.
“Confidence in pensions has slumped at a time when it needs to be growing. It’s worrying that from next year millions of people will be auto-enrolled into a savings vehicle they have so little faith in. Politicians have to boost confidence in pensions, or people will simply opt out. We need a pension framework that the public can believe in and rely on,” Ms Segars said.
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