UK - Pension savings by staff in small-to-medium sized firms would grow by £3bn a year if the government changed scheme "opt-out" rules, new research suggests.
The study – carried out by IFA Virgin Money – points out that nine million people work for SMEs but scheme membership averages around 46% compared with 80% at larger firms.
Virgin Money believes a major stumbling block is the government’s decision to alter the opt-out rule. Until 1988, workers were automatically enrolled into a company pension scheme unless they chose to opt out. Since then, workers have to make a conscious decision to join.
A Virgin Money spokeswoman said: “At the moment there is a huge savings gap. Reintroducing the pre-1988 system would be an easy way to increase pensions.”
Virgin Money director Gordon Maw added: “We believe it wouldn’t take much to close the so-called £28bn savings gap and concepts like a workplace opt-out could provide the stepping stone needed to make a real difference.”
But Cartwright Consulting director David Pettitt said Virgin Money’s suggestion would only have an effect at firms “which already graciously provide a pension scheme for those who have opted in”.
And he forecast that some degree of compulsion is inevitable.
He added: “It is interesting to compare the situation to Australia where compulsory employer contributions to pension schemes were phased in over a number of years.
“The compulsory contribution rate in Australia is now around 9%-10% of salaries.”
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