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20th June 2019
:: Blog | October 2009 (13 blogs) | Cause and effect: pension auto enrolment opt-out rates

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Cause and effect: pension auto enrolment opt-out rates 
It’s been a busy week for research reports with another released yesterday by the Pensions Policy Institute, a non-political organisation that comments on pension and retirement issues in the UK.
In third of a series of four reports about the current and future pensions landscape, this one punches above its weight and I liked the Summary and Conclusions (page 3 of the report, but page 9 of the pdf). It lists key facts about the Government’s private pension reforms and the changes that are already occurring in the private pensions market and those likely to occur in the future: 
  • The risks associated with pension funds are increasingly passed from employer to employee.
  • Currently around 40% of the working age population (around 14 million people) are saving in a private pension, meaning occupational, private or personal pensions, including individual and group personal pensions.
  • Assuming that opt-out rates after auto-enrolment are in line with Government expectations, the proportion of people with private pension savings after 2012 could rise from around 40% of the working age population today (around 14 million people) to around 21 million people, or roughly 60% of the UK working-age population once the Government’s reforms are fully implemented.
  • Active membership in Defined Benefit schemes could reduce by around 40% in the private sector by 2050, from current levels of around 2.5 million active members to around 1.5 million by 2050.
  • Active membership in Defined Contribution schemes could reach around 15 million by 2020 and around 17 million by 2050, compared to an estimated 5 million today.
  • The amount held within DC pension funds could grow from around £600 billion today to between £700 billion and £900 billion (2009 earnings terms) by 2050, depending on how employers respond to the private pension reforms. 
The move from defined benefit to defined contribution is the one that the public will find hardest to digest.

And, nevermore so than when the first tranche of retirees with small funds find it difficult to annuitise because it is an unprofitable marketplace for product providers to support.

When that happens to tens of thousands of people is, in my opinion, when we’ll see some real backlash. See:
Mike Jones, Ltd, October 23rd 2009

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