More people opt out workplace pensions amid cost-of-living crisis
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There are more people opting out of their workplace pension through auto-enrolment as the cost-of-living crisis has hit households.
The opt-out rate has risen to 10.4% in August 2022 from 7.6% in January 2020, research by the Department for Work and Pensions shows.
Tom Selby, head of retirement policy at AJ Bell, said the increase was unsurprising “in the face of this torrent financial pressure".
He said “encouragingly”, the figure remains relatively low at just over 10% but warned it could rise.
“The government will undoubtedly be nervously watching those pension participation rates, and for some savers the double hit of rising energy and housing costs will inevitably be the straw that breaks the camel’s back.”
Inflation in the UK hit 10.1% in September mainly due to rising food costs, but energy bills are expected to go up further this winter.
The DWP also found the number of people paying into their pensions from 11 large private pension providers have increased between January 2020 and August 2022. In addition, the total contributions to these 11 providers have also increased over this time and were 32% higher in August 2022 than in January 2020.
Selby said: “This could in part reflect the fact some found themselves in a better financial position during the pandemic and so upped their contributions.
“It could also be a sign that employers operating in a tight labour market are boosting their pension offering in order to recruit and retain staff.”
Selby’s comment is similar to that of Paul Cullum, head of financial services at economics consultancy Frontier Economics.
Cullum said earlier this year levels of auto-enrolment were maintained and contributions increased at the start of the Covid-19 crisis as many people spent less during that period. However, he added with inflation, people may cut back on spending.
Will AE opt out rate go up further this year?
