Auto-Enrolment: Will Youngsters Vote with their Feet?

Employees are about to be compelled to save for a pension – but only if they wish to be!

Auto-enrolment is one of the key components of the Workplace Pension Reforms due to begin in 2012. The Government hopes this will encourage millions of people to begin saving for their retirement.

However, whilst it will be compulsory for employers to auto-enrol their (eligible) employees into a qualifying workplace pension scheme – and pay contributions – there is no compulsion on any employee to remain in the scheme. That means workers can choose to opt out, as long as they don’t mind giving up their firm’s contribution.

Industry expert Steve Bee refers to this odd contradiction as ‘voluntary compulsion’. Employees are about to be compelled to save for a pension – but only if they wish to be!

Some pundits believe it is probable that millions of young people will opt out. With the economy in the doldrums, money is tight and debt levels high, and saving for the distant future is hardly likely to be a top priority. What attraction is there for young people in seeing a big chunk of their income tied up for decades when they need it now?

If a large proportion do choose to opt out, the Government’s vision of creating a new era in pension saving will stall at the very least.

Source: www.moneymarketing.co.uk  16 November 2011

For more information, contact Brunsdon at www.brunsdon.co.uk

Brunsdon LLP and Brunsdon Financial Services Ltd are authorised and regulated by the Financial Services Authority.

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