Auto-enrolment opt outs are less than 10%

Auto-enrolment opt-out levels are less than 10%, according to research by the Chartered Institute of Personnel and Development (CIPD).

Its Pensions automatic-enrolment: the lessons for small and medium-sized employers research, which surveyed 399 private sector organisations, also found that the average contributions from employees and employers stand at 4% and 6% of salary, respectively.

The research also found that only 9% of large employers have sought to recoup the cost of implementing auto-enrolment by limiting pay growth or cutting other elements of the pay package.

Among respondents that are due to automatically enrol their staff in the spring of 2014, the research found:

  • 26% anticipate that they will need to reduce pay growth.
  • 22% expect to have to freeze pay in order to absorb the costs associated with auto-enrolment.
  • 23% predict a knock-on effect for other elements of the pay package, such as cuts to bonuses or overtime.

To coincide with the research, CIPD has published a guide offering advice on how organisations can take a more strategic approach to workplace pensions by ensuring auto-enrolment is aligned to its business strategy, culture and brand.

The guide also aims to demonstrate how auto-enrolment pension schemes can be effectively integrated into existing HR and reward strategies, as well as meeting the needs of an increasingly diverse workforce.

Charles Cotton (pictured), performance and reward adviser at the CIPD, said: “While large organisations tend to have long-established traditions of paying in to employee pensions, for many [small and medium-sized enterprises] (SMEs) this is their first foray into the world of pensions.

“They are unlikely to have access to the same levels of expertise or support networks as their larger counterparts and, as our survey reveals, many fear that it could be a costly exercise for their business. 

“However, with early planning and preparation, SMEs can overcome any challenges and realise the opportunity that auto-enrolment offers. With some 30,000 employers due to go through the auto-enrolment process between April and July 2014, demand for professional advice and guidance from pension advisers and providers is going to be high. 

“We would therefore urge SMEs to act now to guarantee access to the best advice, to negotiate the best rates and secure the most appropriate pension scheme for their business.”