Blog

24/01/19
The Department for Work and Pensions (DWP) has stated that is it committed to fully evaluating the effects of the workplace pension reforms, as set out in its evaluation strategy, which was refreshed in 2017. Evaluation reports have been published annually since 2013, following a baseline report in 2012 which described the landscape before the implementation of automatic enrolment. This report brings together the latest evidence, including evidence published within the last 12 months and new analysis conducted for the report, showing what has happened since automatic enrolment began.

Key findings in the report
  • Data collected up to 2017 found that the number of eligible employees participating in a workplace pension has increased to 17.7 million, 84%, up from 10.7 million, 55% in 2012. Overall, eligible employees are continuing to save persistently.
  • The annual total amount saved by eligible employees across both sectors (public and private) stands at £90.3 billion in 2017, an increase of £4.3 billion from 2016. Annual total amounts increased in both public and private sectors from 2016. The public sector increased by around £0.3 billion and the private sector by £4.0 billion.
  • Rates of opt-out and cessation (stopping saving into a pension after the optout period) have at the end June 2018 remained consistent with levels before the first planned contribution increase in April 2018.
  • Those who are enrolled due to staging have higher opt-out rates than those enrolled due to starting a job with an employer who already has ongoing automatic enrolment duties.
  • Males and females have the same levels of opt-out, but males have slightly higher levels of cessation.
  • Generally, older age groups have higher opt-out rates, but those aged 22 to 29 and 60 to State Pension age have the highest cessation rates – although these rates are at relatively low levels.
  • Higher earners tend to have higher opt-out rates than lower earners, while (with the exception of the highest earners who have the highest cessation rates) there is not much variation in cessation rates by earnings level.
  • In 2017, over 7 million eligible private sector employees saving into a workplace pension received an employer contribution of two per cent or above (above the then-minimum contribution rate); of these, 5.5 million received an employer contribution of four per cent or above.
  • More than 92% of eligible employees in the private sector contributing between three and four per cent received a matching (or higher) employer contribution rate.
  • Approximately 5.9 million eligible employees were already meeting the April 2019 minimum contribution rates, based on data from April 2017. However, around 5.1 million eligible employees were still contributing below April 2018 minimums at that time, and around 6.1 million will have to increase their contributions by April 2019, if not earlier.
  • The rate of levelling down (reducing the generosity of contributions or outcomes for existing pension scheme members) has increased slightly since 2012. However, findings from the Employers' Pension Provision Survey 2017 suggest that where employers have experienced increased contribution costs as a result of automatic enrolment, only one per cent of employers have adopted levelling down as a strategy to absorb increased contribution costs.
  • Findings from the DWP’s communications tracking research (June 2018 wave) found that majority of individuals interviewed viewed automatic enrolment as a good thing for them personally (82%); agreed saving into a workplace pension was normal for them (80%); and knew where to go if they wanted to find more about workplace pensions (83%).
  • The emerging findings from forthcoming DWP research with new employers, to be published in 2019, suggest that the reality of implementing automatic enrolment was usually less burdensome than employers had anticipated. The financial burden among those interviewed, over and above the ongoing cost of employer contributions, was either small or even non-existent.

Comment - The next evaluation report published in 2019 will take account of the increased in contribution rates, which may have an impact on the opt out rates of auto enrolment.