For U.K. employers with fewer than 10 employees, opt-out rates from company retirement plans of between 26% and 30% are triple the rates of larger firms, according to a survey by the U.K. Association of Consulting Actuaries.
More than two-thirds of executives at the smaller plans expected modest or substantial decreases in plan participation in 2019, the survey found.
The ACA called on the U.K. government to set a long-term policy for mandatory contribution increases after finding 81% of surveyed employers supported extending automatic enrollment to employees aged at least 18 and increasing minimum mandatory contributions after April, when the last phase of automatic escalation will take place.
According to U.K. legislation passed in 2012, mandatory total contributions were set to automatically escalate twice: once in 2018 and once in 2019 to 5% and 8% of salary, respectively.
Jenny Condron, ACA chairwoman, said in a news release that the association supported more automatic increases beginning in 2025 to between 12% and 14% of earnings. Ms. Condron said contribution increases to between 8% and 10% — which were considered acceptable by employers responding to the survey — are unlikely to provide adequate retirement income.
Some 88% of employers said the increase in minimum contributions in April 2018 did not have an adverse impact on participation, with 75% of employers forecasting no participants will be dropping out of their plans as a result of the next scheduled increase on April 6.
The survey found that the level of contributions potentially supported by the surveyed employers was on average 8%, with employers and employees contributing 4% each. Employers with 500 staff members or more said they would agree to a 10% contribution rate, split equally between the employee and the employer.
"Our annual survey points to the need — part of which we see as an essential addition to the government's 'next steps' pensions strategy — for a gradual, but essential increase in the default level of savings into DC schemes," Ms. Condron said in the news release.
"In our recommendations within the report, we favor earnings from the first (pound) being eligible for automatic enrollment by 2021 as proposed by the 2017 review. At the same time, actions are needed to draw more of those on lower incomes and the self-employed into (auto-enrollment) levels of contributions, beginning with the gig economy's employers. We believe the phasing should alert workers so they, too, can plan ahead, whilst also recognizing that there might be strained economic conditions over the period."