The DWP has slashed its forecast of how many people it expects to opt out of auto-enrolment, from 30 percent, to just 15 percent.

This lifts its projection of new pension savers as a result of auto-enrolment from eight million to nine million. The revision comes after opt-outs from the largest schemes were found to be just ten percent. It is important to recognise that an ‘opt-out’ has a very specific meaning in the context of auto-enrolment. It refers to someone who stops pension saving within one month of being auto-enrolled. Someone who stops after this period is not classed as an ’opt-out’, but is nonetheless still not saving for retirement.

Caution therefore needs to be needed when interpreting opt-out rates. These figures need to be checked against the number of active pension savers, to get a true picture of how many people are slipping through the net. Laith Khalaf, Head of Corporate Research, Hargreaves Lansdown: “The DWP may be counting their chickens before they are hatched. Early signs from the auto-enrolment programme are encouraging, but much of the heavy lifting still needs to be done.

In particular as smaller and medium-sized companies start to auto-enrol, opt-out rates may grow. Likewise as auto-enrolment contributions rise above one percent of salary from 2017, employees may start to flinch at more of their pay packet going into a pension. Employees therefore need to understand why they are paying into a pension, lest they fall off the savings wagon at the first bump in the road. Employers can achieve this by supplementing auto-enrolment with financial education in the workforce, to explain to members how much they should be putting away for retirement, and how to make the most of the savings they have made.’