On the go: The government has claimed it is unable to determine whether opt-outs from auto-enrolled pensions have increased since the Covid-19 pandemic, the minister for pensions and financial inclusion has said.
In a written statement, Guy Opperman admitted the Department for Work and Pensions does not yet have suitable data to determine how many employees have reduced their contributions, or stopped saving, since the start of the lockdown period.
Mr Opperman said: “We are monitoring the impacts of Covid-19 on workplace pension participation and saving levels, and are working closely with the pensions industry and across government to understand the impact of the emergency.”
He added: “Helping people to save for their futures remains a key priority for this government. We put in place an unprecedented package of support to strengthen job and income security during the emergency; this included help to ease workplace pension saving for businesses with furloughed workers.
“As part of the next phase of its response, the government’s goal is to support, create and protect jobs; and giving businesses confidence to retain and hire workers supports the capacity for retirement saving.”
At the beginning of the lockdown, the Pensions Regulator warned employers against encouraging savers to opt out of auto-enrolment.
The regulator said even though staff may choose to reduce their contribution levels or opt out of the pension scheme altogether in order to save on outgoing costs during this difficult time, the employer must not encourage this and should continue to carry out its obligations under the existing pension scheme rules.
For those that have chosen to opt out, the work and pensions committee urged TPR to consider helping such workers re-enrol sooner than the current three-year timeframe under auto-enrolment rules to protect their pension pots.
At the time, Tom Selby, senior analyst at AJ Bell, said: “The pandemic has placed huge strain on household incomes and it is inevitable some people struggling to make ends meet will have felt it necessary to opt out of their workplace pension.
“It is crucial these people are nudged back into saving for retirement as soon as possible.”
Meanwhile, the Institute for Fiscal Studies has previously suggested that savers on the lowest of incomes should opt out of their auto-enrolment pension on a temporary basis to build up a rainy day fund.
According to the IFS, circumstances in which it could be more beneficial for employees to leave a pension scheme included having high current spending needs or low standards of living.
People who were indebted with high-interest loans or were in arrears with bills — such as rent, mortgage or council tax — that may have legal consequences if not paid in time may also be better off forgoing employer pension contributions in favour of paying off these debts first.
