Auto enrolment opt-out rates could increase if employees are not aware of imminent contribution rates changes, the Liberal Democrats have warned.
From April, employees will need to contribute a minimum of 3% of their salary and a further 5 per cent from April 2019.
According to the Liberal Democrats, while there is currently an opt-out rate of just 10 per cent, this could lead to more opt-outs if employees are not prepared and notice lower-than-usual monthly wages.
Calling on the government to launch a national awareness-raising campaign, Liberal Democrat work and pensions spokesman said: “With wage growth still lagging behind inflation, it is understandable that many working people will be anxious not to see their pay fall further.
“But paying into a workplace pension now is a profit for the rest of your life. That’s why I’m calling on the Secretary of State to instigate a national publicity campaign to explain to workers what is happening and what the consequences of the different courses of action are.”
Chris McWilliam, principal at Aon Employee Benefits said that employers play a key role in the success of auto-enrolment, while applauding the need for a national campaign.
He added: “Clear communication about what is changing, and why, will help workers understand the changes and accept them. Reinforcing this message through financial wellness sessions will help, as will greater employee engagement with their benefits.”
On the subject of opting out, McWilliam said: “There was widespread scaremongering when auto-enrolment was first introduced about opt out rates being high. I believe that opt out rates won’t change significantly because inertia will mean many people just accept the change.”
However, he predicted an increase in opt out rates when contributions increase by an extra 2 per cent next year, because people will notice that the amount of take home pay will go down. In which case, a national campaign ‘would certainly’ help raise awareness that money is being invested for peoples’ futures, while helping people see the value in the increased rates of contribution, he said.
Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.