Talking head: Steve Bee seeks to dispel concerns that a much higher proportion of auto-enrolled workers at smaller employers will reject their new benefit and so undermine workplace pensions reform.
That has begun to happen and by next early spring we will start to see the very small employers, those with fewer than 50 employees, hitting their staging dates, and we will know if this reform will be judged a great success or a great failure.
Opt-out rates among young people are no higher than they are for any age group
Of the 1.3m employers that are affected by auto-enrolment, almost 1m have fewer than 10 employees. Auto-enrolment has always been more about chip shops and corner shops than national supermarket chains and international conglomerates.
The big surprise when the larger employers first started auto-enrolling workers was that opt-out rates were reassuringly low.
The naysayers appeared to be wrong – people would not opt out just because they could. But did that just mean that larger employers with the most resources were simply better at communications and managing the process?
My business, Jargonfree Benefits, has so far run the auto-enrolment processes for over 30,000 employees of smaller employers, so we have gained a little knowledge of the small and medium-sized enterprise market thus far.
Our experience is that opt-outs are as low for SME firms as they are for larger firms. We were also mildly surprised to find that opt-out rates among young people are no higher than they are for any age group.
That goes against the widely believed myth that young people cannot afford a pension while they have so many other financial issues to deal with, and they will therefore opt out in their droves once they are auto-enrolled.
That didn’t happen for the larger firms and in our experience it is not happening with the mid-sized firms either. I spoke about this at a conference in London last week launching public ration consultancy MRM’s latest report on young people’s finances, Generation Austerity.
Its findings confirmed what we have been experiencing in real life: nearly six in 10 twentysomethings (59 per cent) said they would join a workplace pension scheme – equal to, or more than, the proportion in any other age group.
And 41 per cent of them said they would be prepared to contribute more than 2 per cent of their salary. So it is not all doom and gloom for the SME market and auto-enrolment, and I do not think it will be for the micro-employer market either.
Steve Bee is CEO and founder at Jargonfree Benefits
