TECHTALK
This article originally appeared in JAN 17 edition of techtalk. Please visit www.scottishwidows.co.uk/techtalk for the latest issue.
WORKPLACE PENSIONS REPORT 2016:
ONE IN TEN OPT-OUTS POINT TO
EMPLOYER INFLUENCE
Mat Zimmerman
A concerning number of workers have said they opted out of their workplace pension scheme
because their employer encouraged them to do so. Employers need to be made aware of their
responsibilities under automatic enrolment and should carefully consider how conversations
may be perceived by their employees.
Research for this year’s Scottish Widows’ Workplace
Pensions Report revealed some really positive insights:
only 3% of people said they intend to opt-out when
minimum contributions go up, fewer people are failing
to save for retirement and there are clear opportunities
to better engage younger workers.
But there is cause for concern after we examined the
reasons people gave for opting out of their workplace
pension scheme. Unsurprisingly, affordability is the
most commonly cited reason, but strikingly, 9% said
their employer encouraged them to opt out. This seems
to be more prevalent in smaller workforces (fewer than
50 employees), where the figure rises to 14%.
The rules for employers are very clear and noncompliance can lead to fines or criminal prosecution. In
fact, the notices that employees submit in the process of
opting out must always include a statement explaining
that employers cannot ask or force people to opt out.
The smallest employers that are yet to stage should take
note, as should organisations going through reenrolment. The Pensions Regulator (TPR) has already
issued over 7,000 fixed or escalating penalty notices for
non-compliance with automatic enrolment rules.
There’s certainly a strong chance that some of this is
unintentional – employers may not be aware that
they’re dissuading members from saving for retirement.
For that reason, it’s important to consider
communications (conversations in particular) carefully.
However employers shouldn’t shy away from talking
about pensions. In addition to mandatory
communications, there is a huge amount of value in
providing more information on the scheme and on
saving for the long-term generally. Workers will have
questions too, and will expect their employer to at the
very least be able to point them in the right direction.
Advisers and employers can play a big role here,
whether it’s giving specific, tailored advice or
guidance to individuals, or providing generic content
to the whole workforce.
TPR also has guidance for employers, explaining what
they can and can’t say about a pension scheme:
www.thepensionsregulator.gov.uk/employers/
communicating-with-your-scheme-members
The recent Financial Advice Market Review recognised
some employers feel it is unclear where the line is drawn
between general support for employees and regulated
advice, and recommended that the Financial Conduct
Authority (FCA) and TPR give greater clarity on what
employers can or can’t say without being subject to
regulation.
While this is being developed, advisers and pension
providers are well placed to help and guide employers to
support their employees in the most appropriate way.
Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HM Revenue & Customs practice, which may change.
However, independent confirmation should be obtained before acting or refraining from acting in reliance upon the information given.
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