Auto-enrolment opt-out rates have remained low among employees recruited after large employers began complying with the legislation, according to research by consultancy Towers Watson.
Its FTSE 350 defined contribution pension survey, which analyses the changes and trends in pension provision among the 350 largest UK-listed organisations, found that the average opt-out rate among new recruits at FTSE 350 firms was 6%.
In three-quarters (75%) of cases, more than 90% of new employees stayed in workplace pension schemes.
The research also looked at the contribution scales operated by FTSE 350 employers.
It found that nearly three-quarters (74%) offer matching contributions in their pension schemes, but that employees who stick with the default enrolment level, rather than choosing to opt up to the maximum contribution level, could be missing out.
However, among FTSE 350 employers, matching contributions are offered on a £1 for £1 basis. This takes the average employer match to around £1.50 for every £1 that the employee contributes above the minimum they must pay into the scheme.
Among FTSE 100 employers, the maximum contribution available averages around 10% of pay.
Will Aitken, senior consultant at Towers Watson, said: “The maximum contributions on offer have barely changed over the past four years but that will be academic if employees don’t take advantage of them.
“The norm is for employers to automatically enrol new staff at the bottom of the matching scale, so employees only get more if they demonstrate that they are motivated by pensions by choosing to save more themselves.
“Even employees who don’t opt out can, therefore, leave money on the table if they don’t opt up. Typically, this means missing out on about 5% of pay, around £1,500 a year for someone earning £30,000.
“Of course, if all employees took full advantage of matching contributions, employers would have to find the money from somewhere. Many already budget for higher pension contributions than they are paying, but some might reconsider their pension offerings or hold down pay rises if they encountered big changes in employees’ behaviour.
“Saving in a workplace pension is becoming the normal thing to do. Although some people may opt out when minimum contribution rates go up, very high pension participation is here to stay.”
