News analysis: Regulatory and government reports on auto-enrolment find good progress has been made in employee engagement despite a small section of the UK's largest employers facing investigation.
Figures from the Department for Work and Pensions show an average of 9 per cent of employees from the UK's largest employers decided not to stay in a pension scheme.
These low rates contradicted original predictions that 20-30 per cent of employees would opt out of workplace pensions. While inertia has seemingly played a large part in the success of the reform, industry experts have said employees are now more engaged with pensions.
AE in numbers
The Pensions Regulator's report released in July found that as of July 1 2013:
1,153 employers had completed registration.
1m eligible jobholders have been enrolled, up from 307,598 at the end of March.
Source: The Pensions Regulator
Adrian Boulding, pensions strategy director at Legal & General, said: "This is going rather better than any of us expected, indeed rather better than any of us dared to hope."
He added the number of people registering to view their accounts online shows an active interest rather than “people not opting out because they can’t be bothered".
The DWP report also showed that overall participation in workplace pensions increased to 83 per cent from 61 per cent.
However, Laith Khalaf, head of corporate research at Hargreaves Lansdown, believes that although the reform may be deemed a success under its own conditions, not enough attention has been focused on the 1.7m people who do not qualify for automatic enrolment.
“The regulations do exclude people and it’s just worth acknowledging that that is still the case,” he said. “There is still going to be a significant group of people who don’t end up with a private pension and some of those will have to rely on the state pension."
This state pension was judged by the Pensions Commission of 2002, which advocated the introduction of auto-enrolment, to “deliver increasingly inadequate and unequal results”.
Non-compliance
As of March, the Pensions Regulator had launched 89 investigations into possible cases of AE non-compliance but only in regard to large employers.
It’s almost impossible for a biggish employer to comply completely with all of the detail
Khalaf said this number was high considering how few companies have taken part in the reform and secondly how big and well-resourced they are. He added this non-compliance was likely to rise among small, less well-resourced employers.
Those under investigation could be employers that have interpreted the legislation differently to the regulator.
Andy Cheseldine, partner at LCP, warned that while the principle of automatic enrolment is clear, it will be difficult for the larger employers to comply wholly with the scheme due to gaps in the regulations.
"It’s almost impossible for a biggish employer to comply completely with all of the detail, there’s always something that’s likely to trip you up," he said.
