Employers’ Pension Provision Survey 2019
Published 28 June 2022
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DWP research report no. 1007
A report of research carried out by Kantar Public and the National Institute Economic and Social Research (NIESR) on behalf of the Department for Work and Pensions.
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First published June 2022.
ISBN 978-1-78659-394-8
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Executive summary
Introduction to the report
This report presents findings from the 2019 Employers’ Pension Provision Survey (EPP 2019). EPP 2019 was commissioned by the Department for Work and Pensions (DWP) and conducted by Kantar Public and the National Institute of Economic and Social Research (NIESR). The 2019 survey was the thirteenth in an approximately biennial series that had been conducted since the mid-1990s.
A key aim of the report is to describe the extent and nature of pension provision among private sector employers in Great Britain in 2019. This includes the proportion of employers providing pensions, as well as types of schemes offered and employer contribution rates. Comparisons are also made with findings from earlier surveys in the series.
The 2019 survey is the first in the EPP series to be able to consider the ongoing effects of the workplace pension reforms now that the roll out of automatic enrolment is complete. The report covers employers’ responses to the reforms, and their views on automatic enrolment. It presents key measures supporting monitoring of the workplace pension reforms, including opt-out, cessation and re-enrolment.
Background
The EPP 2019 survey was conducted among a representative sample of private sector employers in Great Britain. The sample was drawn from the Inter-Departmental Business Register (IDBR). Fieldwork for the survey was conducted by telephone and took place between July and October 2019 and 2,968 organisations took part in the interview. The response rate at the main interview stage was 44 per cent.
The workplace pension reforms, introduced following the 2008 Pensions Act (and updated as part of the 2011 and 2014 Pension Acts), require all employers to automatically enrol all eligible employees into a qualifying workplace pension scheme, although employees can choose to opt out. Employers are also required to make a minimum contribution to the pension scheme.
The extent of pension provision in 2019
Since the introduction of the workplace pension reforms, the proportion of private sector employers who offer pension provision for their employees has been rising. In 2019, almost three-quarters (71 per cent) of private sector employers made some form of pension provision for their employees. This represented an increase since 2017, when the equivalent figure stood at 56 per cent, and continued the increase seen since 2013, when 32 per cent of private sector employers offered some form of provision. This provision could include an occupational pension scheme, a group personal pension (GPP) scheme, a stakeholder scheme, access to the National Employment Savings Trust (NEST), a Master Trust scheme (other than NEST) or an arrangement whereby the employer made contributions to employees’ personal pensions (PPs).
The reforms require employers to enrol eligible employees into a workplace pension scheme. Focusing solely on provision of ‘workplace pension schemes’ and ignoring contributions to employees’ personal pensions, around three-fifths (62 per cent) of private sector employers provided a workplace pension scheme in 2019. In comparison, in 2013, one fifth (19 per cent) of employers offered a workplace scheme.
In 2019, almost all small, medium and large employers offered some form of workplace pension provision. Non-providers were predominantly micro employers, with around half (51 per cent) of micro employers offering a workplace scheme. It was micro employers, however, that had seen the most sizeable increase in provision since 2017, when 35 per cent had a workplace scheme. The most commonly reported main reason for not providing a pension was that the company had a director only (stated by 45 per cent of non-providers), pointing to some potential confusion over employment status and pension regulation applicability. It is important to bear in mind that non-providers accounted for a very small share of employment, such that overall, 94 per cent of all employees worked for an employer offering a workplace pension scheme.
The most commonly provided scheme type was access to NEST, offered by 45 per cent of employers, compared with 30 per cent in 2017. This continued the rapid increase seen between 2013 and 2017; in 2013, only one per cent of employers offered access to NEST. Other scheme types remained less common; six per cent of employers provided occupational pension schemes, six per cent provided a workplace SHP scheme, five per cent provided GPPs, three per cent offered access to a master trust scheme other than NEST and 13 per cent of firms provided contributions to personal pensions.
Some pension schemes are closed, and others attract no employer contribution. In 2019, almost three-fifths (57 per cent) of private sector employers had some form of workplace pension provision that was open to new members and attracted an employer contribution. This represents a considerable increase compared with 2017 when this applied for 41 per cent of private sector employers, and compared with 2013, when ten per cent of private sector firms had an open workplace pension scheme that attracted employer contributions.
Communications and advice about workplace pensions
The most common form of communication provided by employers about workplace pensions was general information about automatic enrolment, with around one-third (34 per cent) of employers doing so. Around three in ten employers (30 per cent) had not communicated information about workplace pensions to their employees. This was most common among micro employers, with 38 per cent of this group having not communicated such information, compared with only two per cent of large employers, and three per cent of small and medium-sized employers. Regardless of employer size, letters were the most common method used by employers to communicate information about workplace pensions. This method was used by around half (52 per cent) of employers.
Overall, just over one third (35 per cent) of employers had not sought external advice about their pension provision arrangements. It was most common for micro employers not to have received advice, applying for 36 per cent of this group, but this was also stated to be the case by 20 per cent of large employers. The most common sources of advice varied by employer size; micro and small employers were most likely to receive advice from an accountant, while pension consultants were most commonly used by large employers.
Employers’ responses and views on automatic enrolment
Around two-fifths (39 per cent) of employers stated that automatic enrolment had resulted in an increase in the total pension contributions they had to make; this proportion increased to three-fifths (63 per cent) among employers with a workplace pension scheme. The most common action taken by employers in response to an increase in total pension contributions was to absorb this cost as part of other overheads (stated by 68 per cent of employers). Taking a reduction in profits was the second most common response (54 per cent).
The minimum contribution required from employers as part of the workplace pension reforms has increased over time. Initially, employers were required to contribute a minimum of one per cent on a band of employees’ earnings[footnote 1], this increased to two per cent in April 2018 and three per cent by April 2019. Around three-quarters of small, medium and large employers had had to increase contributions to meet the increase in minimum contributions required in April 2019.
The average employer contribution received by members of a pension scheme used for automatic enrolment stood at three per cent of gross pay, based on contributions in the 2018/19 financial year. Just over one in ten (13 per cent) of employers with a workplace pension scheme were contributing above the required minimum contribution of three per cent in a scheme used for automatic enrolment. Around one third (34 per cent) of those doing so said this was because they wanted to offer a better option for their employees.
When employers were asked about their views on the advantages of automatic enrolment to the employer, the most commonly reported advantage was that this was a tax efficient way of compensating employees (stated by 16 per cent), followed by helping to streamline pension provision (14 per cent). Around three in ten (28 per cent of) employers reported no advantages to employers of automatic enrolment. Medium and large employers were significantly less likely to state this was the case (standing at 16 and 14 per cent respectively).
Employers were also asked for their views on two potential changes to the eligibility criteria and contributions rates for automatic enrolment. More than two-thirds of employers (68 per cent) agreed with reducing the lower age limit for automatic enrolment from 22 to 18 years, while around one sixth (17 per cent) disagreed. Just under half of employers (43 per cent) agreed pension contributions should be calculated from the first pound earned rather than the lower earnings limit[footnote 2], while a similar proportion (37 per cent) disagreed.
Opt-out, cessation and opt-in
Five per cent of private sector employers with a workplace pension scheme had enrolled at least some non-eligible workers into a scheme in the last financial year (2018/19). This was more common among larger employers, applying for 44 per cent of large firms compared with three per cent of micro firms. In 67 per cent of schemes where at least some non-eligible employees had been enrolled, employees had actively asked to join the scheme, while for 19 per cent this was a result of a company policy to enrol everyone. In the remaining 14 per cent of such schemes this was due to some other reason.
Where an employee has been automatically enrolled, they can choose to ‘opt out’ of a pension scheme. This has the effect of undoing active membership, as if the worker had never been a member of a scheme on that occasion. It can only happen within a specific time period, known as the ‘opt-out period’. If an eligible employee chooses to stop paying into an automatic enrolment scheme after the end of the opt-out period, they are said to cease active membership, known as cessation.
In 2019, the overall opt-out rate stood at nine per cent. This is based on the number of workers automatically enrolled in the last financial year who had opted-out within one month. This is unchanged from the opt-out rate seen in 2017.
Employers estimated that 19 per cent of employees who had been automatically enrolled in the last financial year had ceased active membership after the first month. In 2017, the equivalent figure stood at 16 per cent.
Almost two-thirds (64 per cent) of employers reported not doing anything to encourage employees not to opt out or cease contributing. Where actions were taken, the most common action was to provide information about the scheme and its benefits, carried out by ten per cent of employers.
Overall, six per cent of employers thought there had been an increase in the number of workers who had stopped saving as a result of the April 2019 increase in minimum contributions required. Medium-sized and large employers were more likely to think this was the case, with this applying for 13 per cent of medium-sized employers and 28 per cent of large employers.
Re-enrolment
At re-enrolment, employers are required to reassess the eligibility of their workforce, with staff who have opted out, ceased active membership or reduced their contributions below the minimum level to be assessed for re-enrolment. Employers must re-enrol any staff member who left the scheme more than 12 months before the re-enrolment date and meets the age and earnings criteria (and may choose to re-enrol other staff members)[footnote 3]. Employers are required to undertake re-enrolment approximately three years after they first automatically enrolled their workforce.
Almost three-fifths (57 per cent) of employers were aware of the requirement to automatically re-enrol their employees. Awareness was much higher among medium and large employers, with 91 per cent of medium-sized employers and 97 per cent of large employers aware.
For micro and small employers, the most common source of advice about re-enrolment was an accountant (used by 49 per cent and 33 per cent respectively). For medium and large employers the most common source of advice was a pension provider, used by 49 per cent of medium-sized employers and 52 per cent of large employers.
Around two-fifths (41 per cent) of employers who had passed their re-enrolment date had sent out communications about re-enrolment to their workers.
The overall opt-out rate following re-enrolment stood at 35 per cent. This is similar to the rate observed in EPP 2017, when opt-out following re-enrolment stood at 33 per cent, however, this figure is not directly comparable, as in 2017 this related only to medium and large employers. While this indicates that opt-out following re-enrolment is higher than opt-out following initial automatic enrolment, it is notable that a sizeable proportion of employees do not choose to opt out following automatic re-enrolment.
Among employers who had not yet passed their re-enrolment date, around one-sixth (15 per cent) had begun preparations for re-enrolment. Among employers who had not begun preparations, almost one quarter (23 per cent) had a plan in place for when they would begin preparing for re-enrolment.
Acknowledgements
We are grateful for the support of colleagues at the Department for Work and Pensions throughout this project. We also thank the survey respondents for giving their time to participate in the survey.
The Authors
John Forth – Bayes Business School (formerly Cass) and NIESR Fellow
Chiara Manzoni – National Institute of Economic and Social Research
Lucy Stokes – National Institute of Economic and Social Research
Catherine Grant – Kantar Public
Keith Bolling – Kantar Public
Sophia Jouahri – Kantar Public
Fiona von Hinten – Kantar Public
Glossary of terms
| Term | Definition |
|---|---|
| Active member | Individuals currently contributing to a pension scheme, or having contributions made on their behalf. |
| Automatic enrolment | In 2008, the Government introduced a law designed to help people save more for their retirement. This requires, from 2012, all employers to enrol their eligible jobholders into a workplace pension scheme if they are not already in one. In order to preserve individual responsibility for the decision to save, workers have the right to opt out of the scheme. |
| Ceasing active membership | If an eligible jobholder chooses to stop paying into an automatic enrolment scheme after the end of the opt-out period, they are said to cease active membership. |
| Cessation | When a worker has ceased active membership. |
| Contributions | The amount (often expressed as a percentage of earnings) that a worker and/or employer pays into a pension. |
| Defined benefit (DB) | A type of occupational pension scheme. In a DB scheme the amount the member gets at retirement is based on various factors, but is predetermined (defined). Examples of DB schemes include ‘final salary’ or ‘career average’ earnings-related pension schemes. In most schemes, some of the pension can be taken as a tax-free lump sum. The rest is then received as regular income, which might be taxable. |
| Defined contribution (DC) | A type of pension scheme. In a DC scheme a member’s pension pot is put into various investments such as shares in public listed companies. The amount in the pension pot at retirement is based on how much is paid in and how well the investments have performed. The pension can usually be accessed from age 55. These are also known as ‘money purchase’ schemes. |
| Earnings trigger for automatic enrolment | The amount a worker must earn before the duty for their employer to automatically enrol the worker is triggered. This figure is reviewed annually by the Government. |
| Eligible jobholder | A worker (sometimes referred to as an employee) who is ‘eligible’ for automatic enrolment. An eligible jobholder must be aged at least 22 but under State Pension age, earn above the earnings trigger for automatic enrolment, work or usually work in the UK and not already be a member of a qualifying pension scheme. |
| Employer size | Employer size is determined by the number of employees. For the purpose of staging dates, The Pensions Regulator categorises employer size based on number of employees in Pay As You Earn(PAYE) schemes as follows: Micro = 1 to 4 employees Small = 5 to 49 employees Medium = 50 to 249 employees Large = 250+ employees |
| Entitled worker | A worker who is: aged at least 16 and under 75; works, or ordinarily works, in the UK; and earns below the lower earnings level of qualifying earnings (£6,136 for the 2019/20 tax year). Entitled workers are not eligible for automatic enrolment, although they can choose to join a workplace pension. Their employer is not required to make a contribution if they do so. |
| Group personal pension (GPP) | A type of personal pension scheme set up by an employer on behalf of its workers. Although the scheme is arranged by the employer, each pension contract is between the pension provider and the worker. The employer may also pay into the scheme, adding money to each worker’s pension pot. |
| Group Stakeholder Pension | An arrangement made for the employees of a particular employer, or group of employers, to participate in a stakeholder pension on a group basis. This is a collective arrangement only; the contract is between the individual and the pension provider, normally an insurance company. |
| Group self-invested personal pension (GSIPP) | A personal pension in which the policy holder rather than the pension company chooses the investments. GSIPPs allow members to invest in a wide range of assets, including commercial property and individual shares. |
| Hybrid pension scheme | A private pension scheme which is neither purely a DB nor DC arrangement. Typically a hybrid scheme is a DB scheme, which includes elements of DC pension design. |
| Implementation | Refers to the period in which employer duties were being introduced. This took place between October 2012 and April 2019 by size of employer (from large to small). See also staging. |
| Independent Financial Advisor | An adviser, or firm of advisers, that is in a position to review all the available products and companies in the market as the basis for recommendations to clients. All Independent Financial Advisers are regulated by the Financial Conduct Authority. |
| Lower Earnings Limit (LEL) | Under automatic enrolment individuals and their employers must contribute above a certain minimum amount. That minimum amount is based on a band of earnings – between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL). Where an individual earns over the trigger of £10,000 and they are aged between 22 and State Pension age (SPA), they will automatically be enrolled into a pension and pay contributions on at least this band of earnings. The 2019/20 levels for the LEL and UEL are £6,136 and £50,000 respectively, reviewed annually. |
| Master trust | A multi-employer trust-based pension scheme, which is promoted to and used by a range of unconnected employers. |
| National Employment Savings Trust (NEST) | A trust-based workplace pension scheme, established by legislation, to support automatic enrolment and ensure that all employers have access to a quality, low-cost pension scheme with which to meet the employer duties. |
| Non-eligible jobholder | A worker who is not eligible for automatic enrolment but can choose to ‘opt in’ to an automatic enrolment scheme and will be entitled to a mandatory employer contribution should they do so. Non-eligible jobholders are in either of the following two categories: a worker who is aged at least 16 and under 75, and earns above the lower earnings level of qualifying earnings but below the earnings trigger for automatic enrolment; or is aged at least 16 but under 22, or between State Pension age and under 75; and earns above the earnings trigger for automatic enrolment. |
| Occupational pension scheme | A type of workplace pension organised by an employer (or on behalf of a group of employers) to provide benefits for employees on their retirement and for their dependents on their death. In the private sector, occupational schemes are trust-based. Types of occupational scheme include DB, DC and hybrid schemes. |
| Opt in | If a worker is not eligible for automatic enrolment, for example a non-eligible jobholder or entitled worker, they can ask their employer to become a member of the pension scheme. If the employer receives such a request then they must put the worker into the pension scheme and, in the case of the non-eligible jobholder, pay contributions to the scheme on their behalf. |
| Opt out | Where a jobholder has been automatically enrolled, they can choose to ‘opt out’ of a pension scheme. This has the effect of undoing active membership, as if the worker had never been a member of a scheme on that occasion. It can only happen within a specific time period, known as the ‘opt-out period’. |
| Opt-out period | A jobholder who becomes an active member of a pension scheme under the automatic enrolment provisions has a period of one calendar month during which they can opt out and get a full refund of any contributions made. This ‘opt-out period’ starts from whichever date is the later of the date active membership was achieved, or the date they received a letter from their employer with their enrolment information. After this opt-out period a jobholder can still choose to leave the scheme at any time, but will not usually get a refund of contributions. These will instead be held in their pension until they retire. A jobholder cannot opt out before the opt-out period starts (i.e., they cannot opt out before they have been automatically enrolled). |
| PAYE | PAYE (Pay As You Earn) is the system that HM Revenue and Customs (HMRC) uses to collect Income Tax and National Insurance contributions from employees. They are deducted throughout the tax year based on employees’ earnings and then paid to HMRC. |
| Pension provider | An organisation, often a life assurance or asset management company, that offers financial products and services relating to retirement income. |
| Pension scheme | A legal arrangement offering benefits to members. |
| Personal pension (PP) | An arrangement where the pension is set up directly between an individual and a pension provider. This could be set up by an employer (see Group Personal Pension) or by an individual (sometimes referred to as an Individual Personal Pension). The individual pays regular monthly amounts or a lump sum to the pension provider who will invest it on the individual’s behalf. The fund is usually run by financial organisations such as insurance companies or asset managers. Personal pensions are a form of DC pension. |
| Planned contribution increases | The Government set a minimum level of contributions that have to be put into a pension scheme by a worker and an employer, and within that set a minimum level for the employer contribution |
Planned contribution increases
| Date effective | Employer minimum contribution | Employee contribution (if employer pays minimum) | Minimum total contribution |
|---|---|---|---|
| Up until 5 April 2018 | 1% | 1% | 2% |
| 6 April 2018 to 5 April 2019 | 2% | 3% | 5% |
| 6 April 2019 onwards | 3% | 5% | 8% |
The state contributes to the worker’s pension through tax relief, typically at their marginal tax rate.
Glossary of terms – continued
| Term | Definition |
|---|---|
| Postponement period | Where new workers or newly eligible workers may have their automatic enrolment delayed for up to three months. |
| Qualifying scheme | To be a qualifying scheme for automatic enrolment, a pension scheme must meet certain minimum requirements set out by The Pensions Regulator, which differ according to the type of pension scheme. DC scheme requirements are based on the contribution rate and require a minimum total contribution based on qualifying earnings, of which a specified amount must come from the employer. The minimum requirements for DB schemes are based on the benefits a jobholder is entitled to under the scheme. Hybrid pension schemes contain elements of DB and DC and, depending on what type of hybrid they are, will have to meet either the same, or a modified version of, the minimum requirements for DB or DC pension schemes or a combination of both. |
| Re-enrolment | Every three years, staff who were automatically enrolled but opted out of or ceased active membership of a pension scheme more than 12 months before an employer’s re-enrolment date must be automatically re-enrolled into the scheme. Again, they have the choice to opt out. This prompts them to revisit their initial decision to opt out. |
| Staging | Refers to the staggered introduction of the employer duties, starting with the largest employers, based on PAYE scheme size, in October 2012, to the smallest in 2017. New PAYE schemes from April 2012 staged last, in 2017 and 2018. Staging has now completed, following the last staging date in February 2018. |
| Staging date | The date on which an employer is required to begin automatic enrolment. This date was determined by the total number of employees in an employer’s largest PAYE scheme on 1 April 2012. |
| Stakeholder pension (SHP) | A type of personal pension arrangement introduced in April 2001 which could be taken out by an individual or facilitated by an employer. Where an employer had five or more staff and offered no occupational pension and an employee earned over the lower earnings limit, the provision of access to a stakeholder scheme, with contributions deducted from payroll, was compulsory. Stakeholder pensions are usually a contract-based pension scheme, subject to government regulations, which limited charges and allowed individuals flexibility about contributions and transfers, introduced in April 2001. These ceased to be mandatory after the workplace pension reforms were introduced. |
| State Pension age (SPA) | The earliest age at which an individual can claim their State Pension. |
| The Pensions Regulator (TPR) | The UK regulator of workplace pension schemes, including limited aspects of workplace personal pensions. It is responsible for ensuring employers are aware of their duties relating to automatic enrolment, how to comply with them and enforcing compliance. It uses a programme of targeted communications and a range of information to help employers understand what they need to do and by when. TPR is also responsible for regulating occupational pension schemes, including master trusts. |
| Upper Earnings Limit (UEL) | Under automatic enrolment individuals and their employers must make contributions above a certain minimum amount. That minimum amount is based on a band of earnings – between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL). Where an individual earns over the trigger of £10,000 and they are aged between 22 and State Pension age (SPA), they will automatically be enrolled into a pension and pay contributions on this band of earnings. The 2019/20 levels for the LEL and UEL are £6,136 and £50,000 respectively, reviewed annually. |
| Worker | An employee or individual who has a contract to provide work or services personally and is not undertaking the work as part of their own business. |
| Workplace pensions | Any pension scheme provided as part of an arrangement made for the employees of a particular employer. |
| Workplace pension reforms | The reforms introduced as part of the Pensions Acts 2007, 2008 (and updated as part of the Pensions Act 2011 and 2014). Starting in 2012, the reforms include a duty on employers to automatically enrol all eligible jobholders into a qualifying workplace pension scheme. |
Reporting conventions
Tables in the report
| Value | Definition |
|---|---|
| 0 | less than 0.5 per cent, including none |
| – | category not applicable |
| ( ) | numbers in parentheses are estimates based on fewer than 100 observations |
All reported items have less than ten per cent non-response, and all estimates have been calculated solely among respondents, unless otherwise stated.
1. Introduction
1.1. Introduction to the report
This report presents findings from the 2019 Employers’ Pension Provision Survey (EPP 2019). The survey was conducted among a representative sample of 2,968 private sector employers in Great Britain. The 2019 survey was the thirteenth in an approximately biennial series that has been carried out since the mid-1990s.
This first chapter outlines the background to the survey and gives a brief overview of the survey methodology. The chapter also provides an overview of the content of the remainder of the report.
1.2. Background to the survey
EPP 2019 was commissioned by the Department for Work and Pensions (DWP) and conducted by Kantar Public and the National Institute of Economic and Social Research (NIESR).
Since the mid-1990s, the EPP survey series has provided comprehensive and authoritative data on key aspects of private sector pension provision, including the overall incidence of provision, types of scheme and contribution rates.
The EPP surveys have also formed a critical source of information on how private sector pension provision is changing following the workplace pension reforms. The reforms, introduced following the 2008 Pensions Act (and updated as part of the 2011 and 2014 Pension Acts), require all employers to automatically enrol all eligible employees into a qualifying workplace pension scheme, although employees can choose to opt out. Employers are also required to make a minimum contribution to the pension scheme. By February 2020, more than 10.2 million workers had been automatically enrolled into a workplace pension scheme[footnote 4].
The 2019 survey is the first in the EPP series to be able to consider the ongoing effects of the reforms now that roll out is complete. At the time of the 2017 survey, for which fieldwork ended in October 2017, while most employers had reached their staging date, some newer employers had yet to do so (with staging dates for these employers covering the period up to February 2018). Since October 2017, new employers have had almost immediate automatic enrolment duties from the point at which they take on a qualifying worker. The 2019 survey also provides an opportunity to assess the impact of phasing, following the increases in the minimum contributions required in both April 2018 and April 2019. In addition, while the 2017 survey was able to consider initial experiences of re-enrolment among medium and large employers, the 2019 survey is the first to provide a broader insight into experiences of re-enrolment, as many more employers have now passed their first re-enrolment date, and some employers will have completed re-enrolment for the second time.
1.3. Survey methods
1.3.1. Sample selection
The sample for the 2019 survey was drawn from the Inter-Departmental Business Register (IDBR) which is held and maintained by the Office for National Statistics (ONS). The IDBR is widely held to be the most comprehensive source of samples for businesses available and was used for all EPP surveys between 2003 and 2013, and in 2017. However, the 2015 survey sample was drawn from The Pension Regulator’s (TPR) database of businesses, based on Pay As You Earn (PAYE) data supplied by Her Majesty’s Revenue and Customs (HMRC).
As with previous sweeps of the survey, larger employers were oversampled. Micro employers account for the majority of private sector organisations, and estimates for all private sector employers, therefore, reflect the dominance of micro employers in the population of firms. However, the minority of large organisations employ the majority of private sector employees. In order to provide a balanced representation of pension provision, the report often presents estimates in terms of both the percentage of private sector employers to which they apply, as well as the percentage of employees who work in those organisations. By oversampling larger employers, this allowed for sub-group analysis among large employers and also enhanced the precision of employment based estimates given the larger organisations account for a greater share of employment. Data are weighted to correct for this oversampling. Improvements to the weighting methodology were adopted for the 2019 survey (see the accompanying Technical Report for further details). The sensitivity of estimates to this updated approach were checked and did not indicate any undue effects on the estimates as a result.
The weighted and unweighted distribution of the sample is shown in Table 1.1.
Table 1.1 Sample profile.
Size of organisation (employees)
| Employer size | Unweighted count | Unweighted % | Employer weighted count | Employer weighted % | Employment weighted count | Employment weighted % |
|---|---|---|---|---|---|---|
| Micro (1-4) | 491 | 17% | 2,308 | 78% | 365 | 12% |
| Small (5-49) | 1,163 | 39% | 605 | 20% | 699 | 24% |
| Medium (50-249) | 451 | 15% | 45 | 2% | 413 | 14% |
| Large (250+) | 863 | 29 % | 10 | 0% | 1,490 | 50% |
Base: All private sector employers.
1.3.2. Advance letter, datasheet and questionnaire
Fieldwork for the survey was conducted by telephone. Prior to taking part in the survey, all employers were sent an advance letter containing information about the survey. The letter was sent via email or, if an email address was not available, via post. Employers with 20 or more employees were also asked to complete an interview preparation form to collate some of the details about their organisation that would be requested during the interview.
1.3.3. Fieldwork and response
There were three stages of fieldwork for the survey, described below:
- the most appropriate contact to complete the telephone interview was identified by a short screening survey
- the advance survey information was sent to the individual identified at the screening stage *the telephone interview was conducted with the identified individual or, in cases where a further referral was taken, another individual within the organisation
Following the screening process, a total of 6,875 cases were issued to the telephone fieldwork.
Fieldwork for the main survey took place between July and October 2019. The questionnaire was administered using Computer-Assisted Telephone Interviewing (CATI) and the interview length was an average of 23 minutes. Overall, 2,968 employers took part in the interview, achieving a response rate of 44 per cent. This is broadly in line with the response rate of 45 per cent achieved for EPP 2017.
1.4. Overview of the remainder of the report
The remainder of this report is divided into six substantive chapters plus two appendices. There is also an accompanying Technical Report.
Chapter 2 provides an overview of pension provision in 2019, describing the extent and nature of provision. It also discusses reasons for non-provision of pensions among employers.
Chapter 3 looks at employers’ communications with their employees about workplace pensions, as well as the extent to which employers’ have sought advice from external sources.
Chapter 4 considers employers’ responses to the reforms, including strategies adopted to manage increases in pension contributions, types of schemes used for automatic enrolment and employer contributions. The chapter also reports on employers’ views on the reforms and on potential changes.
Chapter 5 explores opt-out rates among employees who have been automatically enrolled and cessation rates. It also explores enrolment of non-eligible employees.
Chapter 6 focuses on re-enrolment, including employers’ awareness, actions among employers who have passed their re-enrolment date and preparations among employers yet to pass their re-enrolment date.
Chapter 7 concludes.
2. Overview of pension provision in 2019
Purpose:
- this chapter outlines the overall extent and nature of pension provision among private sector employers in Great Britain in 2019. Comparisons are made with the extent and nature of provision in 2017 and 2013
Key findings:
- around three-fifths (62 per cent) of private sector employers offered a workplace pension scheme in 2019. This represents a notable increase since 2013, when this applied for 19 per cent of private sector employers, and even since 2017, when 47 per cent provided a workplace scheme
- such provision was almost universal among small, medium and large employers in 2019, and applied for around half (51 per cent) of micro employers
- overall, 94 per cent of employees worked for an employer offering a workplace scheme, compared with 76 per cent in 2013 and 91 per cent in 2017
- the most commonly provided scheme type was access to NEST, offered by 45 per cent of employers. Other scheme types remained less common; six per cent of organisations provided occupational schemes, and six per cent provided SHP schemes; five per cent provided GPPs; and three per cent access to Master Trust schemes other than NEST
- if contributions to personal pensions are included, almost three-quarters (71 per cent) of private sector employers offered some form of pension provision, and 96 per cent of employees worked in these firms
- overall, 57 per cent of private sector employers had an open workplace pension scheme to which they were contributing. These organisations employed 92 per cent of all private sector employees. Both these figures had increased significantly since 2013 and 2017, when ten and 41 per cent of private sector organisations respectively had an open workplace pension scheme that attracted employer contributions, with 63 per cent of private sector employees working in these organisations in 2013 and 87 per cent in 2017
- the percentage of private sector employees who were active members of a workplace pension scheme stood at 67 per cent in 2019. One quarter (25 per cent) of all private sector employees were members of NEST, 17 per cent were members of GPP schemes, 11 per cent were members of occupational schemes; six per cent were members of Master Trust schemes other than NEST and five per cent were members of stakeholder schemes
2.1. Introduction
This chapter provides an overview of pension provision by private sector employers in 2019. The chapter begins by reporting on the prevalence of pension provision among private sector employers, including variation by employer size. The chapter then goes on to report on the characteristics of non-providers and reasons for non-provision among those employers not offering a pension scheme. The types of pension scheme offered are also discussed, as well as whether pension schemes were open to new members and attracted employer contributions. Throughout the chapter comparisons are made with previous surveys in the EPP series, predominantly with the 2017 survey but also in some instances with the 2013 survey[footnote 5].
The pension arrangements reported on in the chapter comprise: occupational pension schemes; group personal pension schemes (GPPs); stakeholder pension schemes (SHPs); access to the National Employment Savings Trust (NEST); access to a Master Trust scheme other than NEST; and, finally, arrangements whereby an employer makes contributions to an employee’s personal pension (PPs). The Glossary to this report provides further details of each type of scheme.
2.2. The incidence of pension provision in 2019
Almost three-quarters (71 per cent) of private sector employers made some form of pension provision for their employees in 2019 (Figure 2.1). This represented an increase since 2017, when the equivalent figure stood at 56 per cent, and continued the increase seen since 2013, when 32 per cent of private sector employers offered some form of provision[footnote 6].
Pension provision was almost universal among small (98 per cent), medium (100 per cent) and large employers (100 per cent). In comparison, just under two-thirds (63 per cent) of micro employers reported offering some form of pension provision. We discuss reasons given for non-provision of pensions in section 2.3.
While micro employers account for a high proportion of all employers, they account for a much smaller share of employment. Overall, in 2019, 96 per cent of employees worked for an employer that offered some form of pension provision.
‘Any Pension provision’ here refers to the provision of an occupational pension scheme, a GPP scheme, a workplace SHP scheme, access to NEST, access to a Master Trust scheme other than NEST, or the provision of contributions to employees’ private personal pensions (PP). However, an employer who makes contributions to employees’ PPs has no role in the establishment or administration of the scheme, or in the enrolment of members. Accordingly, contributions to employees’ PPs do not constitute qualifying schemes under the workplace pension reforms, irrespective of the level of contributions. Figure 2.2 indicates the provision of ‘workplace pension schemes’ once these arrangements are ignored (thus focusing solely on the provision of occupational schemes, GPPs, workplace SHPs, NEST and other Master Trust schemes). On this basis, just over three-fifths (62 per cent) of employers currently have some form of workplace pension provision; these organisations employ 94 per cent of all employees. In comparison, in 2013, one fifth (19 per cent) of employers offered a workplace scheme, with these organisations accounting for 76 per cent of all employees. While around half (51 per cent) of micro employers offered a workplace scheme, it was this group that had seen the most sizeable increase in provision since 2017, when the equivalent figure stood at 35 per cent.
Figure 2.1 Any pension provision, by employer size, 2013, 2017 and 2019
| Year | Micro | Small | Medium | Large | All employers | Employment |
|---|---|---|---|---|---|---|
| 2013 | 26% | 47% | 84% | 96% | 32% | 79% |
| 2017 | 45% | 91% | 100% | 100% | 56% | 93% |
| 2019 | 63% | 98% | 100% | 100% | 71% | 96% |
Base: all private sector employers.
Notes: ‘Any pension provision’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to the NEST scheme, access to a Master Trust scheme (other than NEST) and to arrangements whereby employers make contributions to employees’ personal pensions. Access to a Master Trust scheme other than NEST is not included in the 2013 figures as this information is not available in the 2013 data.
Figure 2.2 Any workplace pension provision, by employer size, 2013, 2017 and 2019
| Year | Micro | Small | Medium | Large | All employers | Employment |
|---|---|---|---|---|---|---|
| 2013 | 9% | 41% | 80% | 96% | 19% | 76% |
| 2017 | 35% | 89% | 98% | 99% | 47% | 91% |
| 2019 | 51% | 97% | 98% | 99% | 62% | 94% |
Base: all private sector employers.
Notes: ‘Any workplace pension scheme’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to the NEST scheme or access to a Master Trust scheme (other than NEST). It thus excludes contributions to personal pensions.
2.3. Characteristics of non-providers and reasons for non-provision of pensions
Non-providers are defined here as those employers not providing any of the scheme types asked about in the survey (those who offer only contributions to personal pensions are still counted as a provider here). As noted above, while almost all small, medium and large employers offered some form of pension provision, just over a third (37 per cent) of micro employers did not. However, it is important to bear in mind that these non-providers accounted for only four per cent of employment.
Almost all (99 per cent of) non providers were micro employers. Compared to providers, non-providers were more commonly found in the wholesale and retail trade industry (Section G of the Standard Industrial Classification 2007) (21 per cent of non-providers compared with 13 per cent of providers). Non-providers were more likely than providers to be more recently established, with 44 per cent of non-providers established since 2012 compared with 34 per cent of providers. Some employers may be non-providers due to not having eligible employees; non-providers did, on average, have a lower percentage of workers earning over the earnings trigger for automatic enrolment, compared with providers.
Employers who did not offer any form of pension provision were asked for their main reason for not making pension provision (Table 2.1). Almost half (45 per cent) of employers who did not offer any form of pension provision said that this was because the company has a Director only. This points to some confusion over employment status and pension regulation applicability for directors. Affordability was reported as the main reason for not offering pensions by seven per cent of employers without provision, and a similar proportion (six per cent) said that their main reason for not offering a pension was due to employing mainly part-time or temporary staff. Around one third (32 per cent) specified other reasons, which included a range of responses such as all employees being over state pension age, that employees did not want a pension (including some who specifically stated that employees had opted out), that they had not got round to setting this up yet, that pensions were too confusing, or that they believed in alternative forms of investment.
Table 2.1 Main reason for non-provision, 2019.
| Main reason for non-provision | All private sector employers without pension provision – % |
|---|---|
| Company has Director only | 45% |
| Cannot afford to make provision | 7% |
| Mainly part-time or temporary staff | 6% |
| Workers earnings below NI lower earnings limit | 3% |
| Organisation only recently established/too new | 2% |
| Workers aged below 22 years old | 2% |
| Other | 32% |
| None of these | 2% |
| Don’t know | 2% |
| Weighted base | 792 |
| Unweighted base | 131 |
Base: All private sector employers without some form of pension provision.
2.4. Types of pension provision
This section reports the incidence of different types of pension scheme, beginning with all private sector employers, before exploring variation by employer size and industry.
Table 2.2 considers the types of scheme offered. The first two columns of the table show the percentages of employers providing specific types of scheme in 2017 and 2019. Six per cent of private sector employers provided occupational pension schemes in 2019 compared with three per cent in 2017.
Five per cent provided GPPs in 2019, and six per cent provided a workplace SHP scheme; both figures are similar to those observed in 2017. The percentage of employers offering contributions to personal pensions stood at 13 per cent in 2019, compared with 11 per cent in 2017, and the percentage offering access to a master trust scheme other than NEST remained unchanged at three per cent. The most notable difference compared with 2017 is the increase in the percentage of employers offering access to NEST, rising from 30 per cent in 2017 to 45 per cent in 2019. This continued the rapid increase seen between 2013 and 2017; in 2013, only one per cent of employers offered access to NEST.
The fifth and sixth columns of Table 2.2 show the percentage of private sector employees who are members of each type of pension scheme. The percentage of private sector employees who are members of a pension scheme has risen from 62 per cent in 2017 to 69 per cent in 2019.
Some 11 per cent of private sector employees were members of occupational schemes; 17 per cent were members of GPP schemes; five per cent were members of SHP schemes; 25 per cent were members of NEST, six per cent were members of Master Trust schemes other than NEST and three per cent received employer contributions to their PPs.
Focusing on workplace pension schemes only, 67 per cent of private sector employees were members of such a scheme in 2019. At the time of the EPP 2011 survey, the last survey prior to the introduction of the workplace pension reforms in 2012, this figure stood at 24 per cent. Provisional estimates for 2019 from the Annual Survey of Hours and Earnings (ASHE) are broadly similar, indicating 73 per cent of private sector employees in the UK were members of a workplace pension scheme[footnote 7].
These estimates are based on the percentage of all private sector employees who were members of a workplace pension scheme; estimates for 2018 from ASHE indicate 85 per cent of eligible employees in the private sector were members of a workplace pension scheme; this stood at 43 per cent in 2012[footnote 8].
The final two columns in Table 2.2 show how active members of pension schemes were distributed across the different forms of provision. So while we have seen above that in 2019, 11 per cent of private sector employees were members of occupational schemes, 16 per cent of all active members belonged to occupational schemes.
Overall, the profile of active membership was fairly similar in 2017 and 2019, with some increase in the percentage of active members who were members of NEST, rising from 31 per cent to 36 per cent.
Table 2.2 Overall incidence and type of provision, 2017 and 2019.
2017
| Type of provision | Private sector employers | Employees working for private sector employers | Active members as % of all private sector employees (c) | Active members of pension schemes |
|---|---|---|---|---|
| Any occupational scheme | 3% | 29% | 9% | 15% |
| Defined benefit | 1% | 17% | 3% | 5% |
| Defined contribution | 1% | 12% | 5% | 9% |
| Hybrid | 0% | 1% | 0% | 1% |
| GPP scheme | 5% | 33% | 16% | 27% |
| GSIPP | 1% | 3% | 1% | 1% |
| Workplace SHP scheme | 8% | 14% | 5% | 8% |
| Access to NEST | 30% | 38% | 19% | 31% |
| Access to Master Trust scheme other than NEST | 3% | 14% | 8% | 14% |
| Contributions to personal pensions | 11% | 9% | 2% | 4% |
| Any pension provision (a) | 56% | 93% | 62% | 100% |
| Any workplace scheme (b) | 47% | 91% | 60% | |
| Weighted base | 2,695 | 2,760 | ||
| Unweighted base | 2,713 | 2,713 |
Base: All private sector employers.
2019
| Type of provision | Private sector employers | Employees working for private sector employers | Active members as % of all private sector employees (c) | Active members of pension schemes |
|---|---|---|---|---|
| Any occupational scheme | 6% | 27% | 11% | 16% |
| Defined benefit | 3% | 15% | 3% | 5% |
| Defined contribution | 1% | 11% | 5% | 8% |
| Hybrid | 1% | 4% | 1% | 2% |
| GPP scheme | 5% | 31% | 17% | 26% |
| GSIPP | 1% | 4% | 1% | 2% |
| Workplace SHP scheme | 6% | 13% | 5% | 8% |
| Access to NEST | 45% | 44% | 25% | 36% |
| Access to Master Trust scheme other than NEST | 3% | 12% | 6% | 10% |
| Contributions to personal pensions | 13% | 9% | 3% | 4% |
| Any pension provision (a) | 71% | 96% | 69% | 100% |
| Any workplace scheme (b) | 62% | 94% | 67% | |
| Weighted base | 2,927 | 2,950 | ||
| Unweighted base | 2,948 | 2,948 |
Base: All private sector employers.
Notes
(a) Figures for ‘Any provision’ may be lower than the sum of the individual forms of provision as some employers may provide more than one type of scheme. (b) ‘Any workplace pension scheme’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to NEST or access to a Master Trust scheme other than NEST. It thus excludes contributions to personal pensions. (c) Figures for ‘Any provision’ take account of multiple memberships, thereby indicating the percentage of all private sector employees who are active members of a pension scheme. The EPP survey data do not allow us to adjust membership data at scheme level to account for this; accordingly the scheme-level figures will slightly over-estimate the percentage of private sector employees who are members of a particular scheme if employees are members of more than one scheme of the same type.
Table 2.3 provides more detail on how the nature of pension provision varies by employer size. Most scheme types are more common among larger employers. For example, around one third (34 per cent) of large employers had an occupational scheme, compared with four per cent of micro employers. Differences by employer size were less apparent for contributions to personal pensions. Small employers however, were the most likely to offer access to NEST; more than two-thirds (68 per cent) of small employers did so, compared with 41 per cent of medium and 34 per cent of large employers.
Table 2.3 Overall incidence and type of provision, by employer size, 2019.
| Type of provision | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers |
|---|---|---|---|---|---|
| Occupational scheme | 4% | 10% | 15% | 34% | 6% |
| Defined benefit | 2% | 5% | 9% | 21% | 3% |
| Defined contribution | 0% | 2% | 7% | 11% | 1% |
| Hybrid | 0% | 1% | 0% | 4% | 1% |
| GPP scheme | 3% | 8% | 30% | 46% | 5% |
| GSIPP | 1% | 1% | 2% | 5% | 1% |
| Workplace SHP scheme | 5% | 10% | 13% | 14% | 6% |
| Access to NEST | 39% | 68% | 41% | 34% | 45% |
| Access to Master Trust scheme other than NEST | 1% | 7% | 12% | 14% | 3% |
| Contributions to personal pensions | 14% | 9% | 10% | 9% | 13% |
| Any pension provision (a) | 63% | 98% | 100% | 100% | 71% |
| Any workplace scheme (b) | 51% | 97% | 98% | 99% | 62% |
| Weighted base | 2,274 | 598 | 44 | 10 | 2,927 |
| Unweighted base | 845 | 1151 | 450 | 862 | 2,948 |
Base: All private sector employers indicated by column headings.
Notes
(a) Figures for ‘Any provision’ may be lower than the sum of the individual forms of provision as some employers may provide more than one type of scheme. (b) ‘Any workplace pension scheme’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to NEST or access to a Master Trust scheme other than NEST. It thus excludes contributions to personal pensions.
Table 2.4 goes on to show how pension provision varies by industry sector. The provision of a workplace pension or any pension provision were both most common in real estate activities (Section L of the Standard Industrial Classification 2017), arts, entertainment and recreation activities (Section R) and other service activities (Section S)[footnote 9].
Some variation is apparent by type of scheme. While access to NEST was again most common in real estate (Section L), arts, entertainment and recreation (Section R) and other service activities (Section S), occupational schemes were most common in construction (Section F) and information and communication (Section J) and GPP schemes most common in manufacturing (Section C).
SHP schemes were most common in manufacturing (Section C), while Master Trust schemes were most common in financial and insurance activities (Section K). Contributions to personal pensions were most common in administrative and support service activities (Section N) and information and communication (Section J).
Table 2.4 Overall incidence and type of provision among employers, by industry sector, 2019.
Industry sector: SIC(2007) Section (c)
| Type of provision | C | F | G | H | I | J | K | L | M | N | Q | R | S | All private sector employers |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Any occupational scheme | 3% | 10% | 4% | (1%) | 4% | 10% | 8% | (5%) | 5% | 5% | 7% | (1%) | 7% | 6% |
| Defined benefit | 1% | 6% | 1% | (1%) | 1% | 7% | 0% | (3%) | 2% | 4% | 4% | (0%) | 4% | 3% |
| Defined contribution | 1% | 1% | 0% | (0%) | 2% | 0% | 7% | (1%) | 1% | 1% | 3% | (0%) | 0% | 1% |
| Hybrid | 1% | 0% | 0% | (0%) | 0% | 0% | 0% | (2%) | 2% | 0% | 0% | (0%) | 0% | 1% |
| GPP scheme | 12% | 2% | 4% | (1%) | 5% | 3% | 5% | (10%) | 8% | 5% | 2% | (5%) | 1 | 5 |
| GSIPP | 0% | 0% | 1% | (0%) | 0% | 1% | 2% | (2%) | 2% | 0% | 0% | (1%) | 0% | 1% |
| Workplace SHP scheme | 13% | 8% | 6% | (11%) | 4% | 5% | 5% | (4%) | 6% | 4% | 3% | (1%) | 7% | 6% |
| Access to NEST | 32% | 45% | 39% | (51%) | 45% | 36% | 29% | (71%) | 37% | 46% | 67% | (79%) | 68% | 45% |
| Access to Master Trust scheme other than NEST | 2% | 4% | 2% | (4%) | 1% | 1% | 7% | (3%) | 3% | 2% | 2% | (3%) | 3% | 3% |
| Contributions to personal pensions | 8% | 18% | 10% | (1%) | 1% | 22% | 21% | (8%) | 19% | 22% | 6% | (1%) | 3% | 13% |
| Any pension provision (a) | 65% | 77% | 60% | (68%) | 58% | 67% | 69% | (98%) | 71% | 76% | 83% | (86%) | 86% | 71% |
| Any workplace scheme (b) | 58% | 63% | 54% | (67%) | 58% | 50% | 51% | (91%) | 56% | 59% | 80% | (86%) | 85% | 62% |
| Weighted base | 145 | 352 | 438 | 114 | 187 | 272 | 51 | 82 | 564 | 268 | 132 | 69 | 132 | 2,927 |
| Unweighted base | 315 | 210 | 491 | 96 | 205 | 125 | 108 | 74 | 359 | 273 | 356 | 86 | 127 | 2,948 |
Base: All private sector employers indicated by column headings.
Notes
(a) Figures for ‘Any provision’ may be lower than the sum of the individual forms of provision as some employers may provide more than one type of scheme.
(b) ‘Any workplace pension scheme’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to NEST or access to a Master Trust scheme other than NEST. It thus excludes contributions to personal pensions.
(c) C: Manufacturing; F: Construction; G: Wholesale & retail; H: Transportation & storage; I: Accommodation & food service; J:Information & communication; K: Financial & insurance activities; L: Real estate; M: Professional, scientific & technical; N: Administrative & support service activities; Q: Human health & social work; R: Arts, entertainment & recreation; S: Other service activities. Sectors A, B, D, E, and P are not presented as they each contain fewer than 50 observations, but are included in the ‘All sectors’ column (full sector labels in Appendix Table A.1).
2.5. Multiple provision
Employers may provide a single type of pension provision or may offer more than one type.
Overall, two-thirds (66 per cent) of employers offered a single form of provision in 2019, with a further five per cent offering multiple types of provision (Table 2.5). In comparison, in 2017 around one half (51 per cent) of employers provided a single type of provision while four per cent provided multiple types. The overall increase in pension provision therefore reflects an increase in the percentage of employers offering a single type of provision (this continues the trend seen between 2013 and 2017). Employers may also operate multiple schemes of the same type, although most of those employers with a single type of provision operate only one scheme of this type.
Table 2.5 Combinations of types of pension provision, 2017 and 2019.
| Type(s) of pension provision | Private sector employers 2017 | Private sector employers 2019 | Employees working for such employers 2017 | Employees working for such employers 2019 |
|---|---|---|---|---|
| Single type of provision | 51% | 66% | 56% | 64% |
| Occupational | 2% | 5% | 9% | 10% |
| GPP | 4% | 4% | 13% | 14% |
| Contributions to personal pensions | 9% | 10% | 2% | 2% |
| Stakeholder pensions | 6% | 4% | 5% | 5% |
| NEST | 27% | 41% | 22% | 29% |
| Master Trust | 3% | 2% | 5% | 5% |
| Multiple types of provision | 4% | 5% | 37% | 32% |
| No provision | 44% | 29% | 7% | 4% |
| Weighted base | 2,695 | 2,927 | 2,760 | 2,950 |
| Unweighted base | 2,713 | 2,948 | 2,713 | 2,948 |
Base: All private sector employers
Notes
In 2019, three per cent of employers offered access to a defined benefit occupational scheme (or schemes) only, while less than 0.5 per cent offered access to a defined contribution occupational scheme(s) only. The remaining two per cent of employers for whom occupational schemes were the sole type of provision offered either a mix of defined benefit and defined contribution schemes, other occupational scheme types, or type was not known for all occupational schemes offered.
The provision of more than one type of scheme was more common among larger employers. Accordingly, while just five per cent of employers provided multiple types of provision, 32 per cent of private sector employees worked in these organisations. The most common combinations were the provision of all scheme types except a non-NEST master trust scheme (12 per cent of employees worked for employers where this was the case), followed by the provision of both an occupational and GPP scheme (six per cent of employees worked in organisations where this applied). Fewer than one per cent of private sector employers offered access to a defined benefit occupational scheme alongside at least one other type of scheme; ten per cent of all private sector employees worked in these organisations[footnote 10].
2.6. Access and contributions
Not all pension schemes provided by employers may be open to new members or offer employer contributions. While employers must provide a qualifying scheme into which eligible employees must be automatically enrolled, they may also have other schemes which are closed to new members or to which the employer does not contribute.
Table 2.6 builds upon Table 2.3 by focusing only on open schemes. Overall, almost three-fifths (59 per cent) of private sector employers had some form of workplace pension provision that was open to new members in 2019. This represents a considerable increase compared with 2017 when this applied for 42 per cent of private sector employers. Similarly, in 2017, 41 per cent of employers offered access to an open workplace pension scheme that offered employer contributions in 2017, while this had risen to 57 per cent in 2019. In comparison, in 2013, only 10 per cent of private sector employers provided an open workplace scheme with employer contributions.
If we consider differences by scheme type, the most notable change between 2017 and 2019 is the increase in the percentage of employers offering access to NEST, reflecting the changes for all schemes (regardless of whether open or closed) shown in Section 2.4, such that 44 per cent of private sector employers offered open access to the NEST scheme in 2019. The prevalence of other scheme types remained fairly similar; five per cent of private sector employers had at least one open GPP scheme, five per cent had at least one open SHP scheme, three per cent an open master trust scheme and five per cent had at least one open occupational scheme. The closure of defined benefit occupational schemes in recent years has been widely documented, and while Section 2.4 showed that three per cent of private sector employers had a defined benefit occupational scheme, Table 2.6 shows that two per cent offered access to an open defined benefit scheme.
Table 2.7 and Table 2.8 show how the estimates presented in the second column of Table 2.6 vary by employer size and industry sector. In common with the similar tables discussed earlier in this section, these tables show that there was considerable variability between sub-groups of employers in the provision of open schemes. In particular, while around one third (34 per cent) of large private sector employers offered access to a defined benefit scheme; this proportion falls to around one fifth (22 per cent) when focusing on open defined benefit schemes only.
Table 2.6 Incidence of open schemes and those attracting employer contributions, 2017 and 2019.
| Type of scheme | Private sector employers – 2017 | Private sector employers – 2019 | Employees working for such employers – 2017 | Employees working for such employers – 2019 |
|---|---|---|---|---|
| Any open occupational scheme | 2% | 5% | 17% | 18% |
| Defined benefit | 1% | 2% | 4% | 6% |
| Defined contribution | 0% | 1% | 11% | 9% |
| Hybrid | 0% | 1% | 1% | 2% |
| Open GPP scheme | 3% | 5% | 31% | 28% |
| Open SHP scheme | 6% | 5% | 11% | 10% |
| With employer contributions | 5% | 3% | 10% | 10% |
| Open NEST scheme | 28% | 44% | 38% | 43% |
| Open Master Trust scheme | 3% | 3% | 14% | 11% |
| Any open workplace pension scheme (a), (b) | 42% | 59% | 88% | 93% |
| With employer contributions | 41% | 57% | 87% | 92% |
| Weighted base | 2,695 | 2,927 | 2,760 | 2,950 |
| Unweighted base | 2,713 | 2,948 | 2,713 | 2,948 |
Base: All private sector employers.
Notes
(a). The figures for ‘Any open pension scheme’ may be lower than the sum of the individual forms of provision since some employers may provide open schemes of more than one type.
(b). ‘Any open workplace pension scheme’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to NEST or to a Master Trust scheme other than NEST. It thus excludes contributions to personal pensions.
Table 2.7 Incidence of open schemes and those attracting employer contributions, by employer size, 2019.
| Type of open scheme | Micro (1-4 employees) | Small (5-49 employees) | Medium (50-249 employees) | Large (250+ employees) | All private sector employers |
|---|---|---|---|---|---|
| Any open occupational scheme | 3% | 9% | 13% | 22% | 5% |
| Defined benefit | 2% | 5% | 6% | 10% | 2% |
| Defined contribution | 0% | 2% | 6% | 10% | 1% |
| Hybrid | 0% | 1% | 0% | 2% | 1% |
| Open GPP scheme | 3% | 7% | 28% | 42% | 5% |
| Open SHP scheme | 4% | 9% | 12% | 10% | 5 |
| With employer contributions | 2% | 8% | 12% | 10% | 3% |
| Open NEST scheme | 38% | 67% | 41% | 33% | 44% |
| Open Master Trust scheme | 1% | 7% | 11% | 13% | 3% |
| Any open workplace pension scheme (a), (b) | 48% | 96% | 97% | 98% | 59% |
| With employer contributions | 46% | 95% | 97% | 98% | 57% |
| Weighted base | 2,274 | 598 | 44 | 10 | 2,927 |
| Unweighted base | 485 | 1,151 | 450 | 862 | 2,948 |
Base: All private sector employers indicated by column headings.
Notes
(a). The figures for ‘Any open pension scheme’ may be lower than the sum of the individual forms of provision since some employers may provide open schemes of more than one type.
(b). ‘Any open workplace pension scheme’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to Master Trust or access to NEST. It thus excludes contributions to personal pensions.
Table 2.8 Incidence of open schemes and those attracting employer contributions, by industry sector, 2019.
Industry sector: SIC(2007) Section (c)
| Type of provision | C | F | G | H | I | J | K | L | M | N | Q | R | S | All private sector employers |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Any open occupational scheme | 2% | 4% | 3% | (1%) | 4% | 9% | 7% | (5%) | 5% | 5% | 7% | (0%) | 7% | 5% |
| Defined benefit | 1% | 1% | 1% | (1%) | 1% | 7% | 0% | (2%) | 2% | 4% | 3% | (0%) | 4% | 2% |
| Defined contribution | 1% | 1% | 0% | (0%) | 2% | 0% | 6% | (1%) | 1% | 0% | 3% | (0%) | 0% | 1% |
| Hybrid | 1% | 0% | 0% | (0%) | 0% | 0% | 0% | (2%) | 2% | 0% | 0% | (0%) | 0% | 1% |
| Open GPP scheme | 12% | 2% | 4% | (1%) | 5% | 3% | 4% | (10%) | 7% | 5% | 2% | (4%) | 1% | 5% |
| Open SHP scheme | 11% | 8% | 5% | (11%) | 4% | 3% | 5% | (4%) | 3% | 4% | 3% | (0%) | 6% | 5% |
| With employer contributions | 3% | 4% | 4% | (0%) | 1% | 3% | 1% | (4%) | 3% | 4% | 2% | (0%) | 5% | 3% |
| Open NEST scheme | 31% | 44% | 39% | (51%) | 43% | 36% | 29% | (71%) | 32% | 46% | 67% | (79%) | 67% | 44% |
| Open Master Trust scheme | 2% | 4% | 2% | (4%) | 1% | 1% | 7% | (3%) | 3% | 2% | 2% | (2%) | 3% | 3% |
| Any open workplace pension scheme (a), (b) | 56% | 57% | 52% | (67%) | 57% | 50% | 49% | (91%) | 50% | 59% | 80% | (85%) | 83% | 59% |
| With employer contributions | 48% | 57% | 51% | (57%) | 54% | 50% | 45% | (91%) | 50% | 58% | 80% | (85%) | 83% | 57% |
| Weighted base | 145 | 352 | 438 | 114 | 187 | 272 | 51 | 82 | 564 | 268 | 132 | 69 | 132 | 2,927 |
| Unweighted base | 315 | 210 | 491 | 96 | 205 | 125 | 108 | 74 | 359 | 273 | 356 | 86 | 127 | 2,948 |
Base: All private sector employers indicated by column headings.
Notes
(a). The figures for ‘Any open pension scheme’ may be lower than the sum of the individual forms of provision since some employers may provide open schemes of more than one type. (b). ‘Any open workplace pension scheme’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to a Master Trust scheme or access to NEST. It thus excludes contributions to personal pensions. (c). C: Manufacturing; F: Construction; G: Wholesale & retail; H: Transportation & storage; I: Accommodation & food service; J:Information & communication; K: Financial & insurance activities; L: Real estate; M: Professional, scientific & technical; N: Administrative & support service activities; Q: Human health & social work; R: Arts, entertainment & recreation; S: Other service activities. Sectors A, B, D, E, and P are not presented as they each contain fewer than 50 observations, but are included in the ‘All sectors’ column (full sector labels in Appendix Table A.1)
3. Communications and advice about workplace pensions
Purpose:
- this chapter explores employers’ communications regarding workplace pensions, including types of information provided and methods of communication. It also reports on external sources of advice on pensions used by employers.
Key Findings:
- the most common form of information provided by employers about workplace pensions was general information about automatic enrolment, with around one third (34 per cent) of employers doing so.
- three in ten (30 per cent of) employers had not communicated information about workplace pensions to their employees. This was most common for micro employers, with 38 per cent of this group having not communicated such information, compared with only two per cent of large employers, and three per cent of small and medium-sized employers.
- regardless of employer size, letters were the most common method used by employers to communicate information about workplace pensions. This method was used by around half (52 per cent) of employers.
- just over one third (35 per cent) of employers had not sought external advice about their pension provision arrangements. The most common sources of advice varied by employer size; micro and small employers were most likely to receive advice from an accountant, while pension consultants were most commonly used by large employers.
3.1. Introduction
This chapter explores communications regarding workplace pensions by employers, both in terms of the types of information provided to employees and methods of communication used. It also considers whether employers sought external advice on pension provision arrangements, and if so, the sources of advice used.
3.2. Communications about workplace pensions
3.2.1. Types of information provided
Employers were asked what information they had communicated to workers about workplace pensions (Table 3.1). The most common type of information provided was general information about automatic enrolment, with around one third (34 per cent) of employers doing so. The next most common communication was information from the pension provider, applying for 13 per cent of employers, followed by information about eligibility criteria and contribution levels in relation to automatic enrolment, both of which were cited by about one in ten employers (10 per cent and 9 per cent respectively).
As Table 3.1 shows, the types of information provided varied by employer size. Most types of information were less commonly provided by micro employers; for example, while around three in ten (28 per cent) of micro employers had communicated general information about automatic enrolment to their employees, more than half of small, medium and large employers had done so. Unsurprisingly, given medium and large employers were more likely to have already passed their re-enrolment date, these employers were more likely to have communicated information about re-enrolment to their employees than smaller employers. Around one-sixth of medium and large employers (17 per cent and 16 per cent respectively) had done so, compared with nine per cent of small employers and five per cent of micro employers.
Around three in ten (30 per cent) of employers stated that they not communicated information about workplace pensions. This was predominantly driven by the actions of micro employers, with 38 per cent of employers in this group stating this was the case, compared with just two per cent of large employers.
Table 3.1 Information communicated about workplace pensions, by employer size, 2019.
| Information communicated about workplace pensions | Micro (1-4 employees) | Small (5-49 employees) | Medium (50-249 employees) | Large (250+ employees) | All private sector employers |
|---|---|---|---|---|---|
| Genneral information on automatic enrolment | 28% | 53% | 57% | 55% | 34% |
| Information about the pension provider (e.g. scheme charges and administration) | 11% | 20% | 23% | 20% | 13% |
| Automatic enrolment information – eligibility criteria | 9% | 12% | 19% | 13% | 10% |
| Automatic enrolment information – contribution levels | 6% | 20% | 27% | 25% | 9% |
| Automatic enrolment information – scheme specific information | 6% | 14% | 19% | 23% | 8% |
| Information about reenrolment | 5% | 9% | 17% | 16% | 6% |
| Details about the Pension Regulator | 3% | 6% | 8% | 6% | 4% |
| Details about where to go for advice or guidance | 3% | 7% | 9% | 9% | 4% |
| Automatic enrolment information – staging dates | 3% | 8% | 9% | 9% | 4% |
| Automatic enrolment information – phasing dates | 2% | 5% | 7% | 6% | 3% |
| References to NEST | 2% | 4% | 1% | 1% | 3% |
| Salary sacrifice | 1% | 4% | 5% | 2% | 2% |
| Information for employees already enrolled into a scheme | 2% | 5% | 5% | 5% | 2% |
| Opt in/out options | 2% | 2% | 3% | 4% | 2% |
| Starter pack/handbook/factsheet | 0% | 2% | 1% | 4% | 1% |
| Something else/other | 11% | 15% | 14% | 17% | 12% |
| Don’t know | 12% | 9% | 4% | 3% | 11% |
| Nothing | 38% | 3% | 3% | 2% | 30% |
| Weighted base | 2,308 | 605 | 45 | 10 | 2,968 |
| Unweighted base | 491 | 1,163 | 451 | 863 | 2,968 |
Base: All private sector employers.
Note
Respondents could give more than one response.
3.2.2. Methods of communication
Where employers provided information about workplace pensions they were asked how this information was communicated to workers.
Letters were the most common method of communication used, with 52 per cent of employers who communicated about workplace pensions using this approach (Table 3.2). The next most frequently used methods were face-to-face communication on a one-to-one basis and sending individual emails, both used by around three in ten employers (32 per cent and 29 per cent respectively). Almost one in ten employers used all staff emails and face-to-face communications with a group of employees (nine per cent and eight per cent respectively). One in ten (10 per cent of) employers stated they used other methods of communication.
Communication methods typically varied by employer size (Table 3.2). While almost half (47 per cent) of micro employers sent letters, around two-thirds of small, medium and large employers did so (applying for 62 per cent of small, 66 per cent of medium and 64 per cent of large employers). Micro employers were also less likely to use all staff emails (seven per cent did so), compared with a quarter (25 per cent) of medium-sized employers and around one in five (22 per cent of) large employers. In contrast, face-to-face communication on a one-to-one basis was more common in the smallest firms, with 34 per cent of micro employers and 31 per cent of small employers using this approach, compared with 16 per cent of medium and 12 per cent of large employers. There was little variation in the use of individual emails by employer size, with around three in ten employers in all size bands using this method.
Table 3.2 Methods of communication about workplace pensions, by employer size, 2019.
| Methods of communication about workplace pensions | Micro (1-4 employees) | Small (5-49 employees) | Medium (50-249 employees) | Large (250+ employees) | All private sector employers |
|---|---|---|---|---|---|
| Letters | 47% | 62% | 66% | 64% | 52% |
| Face-to-face on a one-to-one basis | 34% | 31% | 16% | 12% | 32% |
| Individual emails | 29% | 29% | 31% | 32% | 29% |
| All staff emails | 7% | 11% | 25% | 22% | 9% |
| Face-to-face with a group of employees | 5% | 15% | 18 % | 12% | 8% |
| Companywide tele-conference | 0% | 0% | 0% | 0% | 0% |
| Webinars | 0% | 0% | 0% | 2% | 0% |
| Other | 9% | 11% | 19% | 35% | 10% |
| None of these | 2% | 0% | 0% | 0% | 1% |
| Weighted base | 1,129 | 533 | 41 | 10 | 1,713 |
| Unweighted base | 304 | 1,051 | 415 | 817 | 2,587 |
Base: All private sector employers.
Note
Respondents could give more than one response.
3.3. External sources of advice on pension provision
Employers were asked whether their organisation received any advice on pension provision arrangements from anyone outside of the organisation. Overall, just over one third (35 per cent) of employers had not sought external advice (Table 3.3). It was most common for micro employers not to have received advice, applying for 36 per cent of this group, but this was also stated to be the case by 20 per cent of large employers.
The most common source of advice varied by employer size. An accountant was the most commonly cited source of external advice for micro and small employers, used by around half of these employers (51 per cent of micro employers and 45 per cent of small employers). In contrast, around a third (30 per cent) of medium-sized employers received advice from an accountant, with similar proportions of employers in this sizeband receiving advice from a pension consultant (28 per cent) or Independent Financial Advisor (27 per cent). For large employers, the most common source of advice was a pension consultant (applying for 41 per cent of this group), followed by an insurance or life insurance company representative (pension provider), used by 35 per cent.
Table 3.3. Sources of external advice on pension provision arrangements, by employer size, 2019.
| Sources of external advice on pension provision arrangements | Micro (1-4 employees) | Small (5-49 employees) | Medium (50-249 employees) | Large (250+) | All private sector employers |
|---|---|---|---|---|---|
| Accountant | 51% | 45% | 30% | 21% | 49% |
| Independent Financial Advisor | 20% | 17% | 27% | 25% | 19% |
| Pension Consultant | 14% | 18% | 28% | 41% | 15% |
| Insurance/life insurance company representative (pension provider) | 9% | 10% | 24% | 35% | 9% |
| Lawyer/legal advisor | 8% | 3% | 10% | 26% | 7% |
| Actuary | 0% | 2% | 5% | 17% | 1% |
| Payroll provider | 0% | 1% | 3% | 1% | 1% |
| Other | 2% | 4% | 4% | 4% | 3% |
| None of these | 36% | 33% | 28% | 20% | 35% |
| Weighted base | 2,263 | 593 | 43 | 10 | 2,909 |
| Unweighted base | 484 | 1,145 | 432 | 823 | 2,884 |
Base: All private sector employers.
Note
Respondents could give more than one response.
4. Employers’ responses and views on automatic enrolment
Purpose:
- this chapter explores employers’ responses to and views on automatic enrolment.
Key Findings:
- around one-sixth (17 per cent) of employers had adopted a postponement period for new or newly eligible employees. This was more common among larger employers, such that three-fifths (59 per cent) of employees worked for an organisation that had done so.
- around two-fifths (39 per cent) of employers stated that automatic enrolment had resulted in an increase in the total pension contributions they had to make; this proportion increased to three-fifths (63 per cent) among employers with a workplace pension scheme.
- the most common action taken by employers in response to an increase in total pension contributions was to absorb this cost as part of other overheads (stated by 68 per cent of employers). Taking a reduction in profits was the second most common response (54 per cent).
- around three-quarters (75 per cent, 72 per cent and 75 per cent respectively) of small, medium and large employers had had to increase contributions to meet the increase in minimum contributions required in April 2019.
- the average employer contribution received by members of a pension scheme used for automatic enrolment stood at three per cent of pay, in line with the required minimum contribution.
- just over one in ten (13 per cent) of employers with a workplace pension scheme were contributing more than three per cent in a scheme used for automatic enrolment. Around one third (34 per cent) of those doing so said this was because they wanted to offer a better option for their employees.
- the most commonly reported advantage of automatic enrolment to employers was that it was a tax efficient way of compensating employees (stated by 16 per cent), followed by helping to streamline pension provision (14 per cent). Around three in ten (28 per cent) of employers reported no advantages of automatic enrolment.
- more than two-thirds (68 per cent) of employers agreed with reducing the lower age limit for automatic enrolment from 22 to 18 years, while around one sixth (17 per cent) disagreed.
- just over two-fifths (43 per cent) of employers agreed pension contributions should be calculated from the first pound earned rather than the lower earnings limit, while a similar proportion (37 per cent) disagreed.
4.1. Introduction
This chapter explores employers’ responses and views on automatic enrolment. The chapter begins by reporting on the use of postponement periods. It then examines the costs of complying with the reforms and the actions taken by employers in response. The chapter also reports on the types of schemes used for automatic enrolment and provides information on employers’ contributions, including the prevalence of employers contributing above the minimum required by the reforms. Finally, the chapter considers employers’ views on advantages of automatic enrolment and on potential changes to automatic enrolment in future.
4.2. Use of postponement periods
An employer can choose to postpone automatic enrolment for new or newly eligible workers for up to three months. This is known as a postponement period, and is for workers who have become eligible after the initial implementation of automatic enrolment. Overall, 17 per cent of employers said they had adopted a postponement period for new workers (Figure 4.1). Larger employers were much more likely to have adopted a postponement period compared with smaller employers; this applied for 71 per cent of large employers, and 61 per cent of medium-sized employers, compared with 11 per cent of micro employers. Almost three-fifths (59 per cent) of employees worked for an employer that had adopted a postponement period for new workers.
Figure 4.1 Employers adopting a postponement period for new employees, by employer size, 2019
| Employer size | Yes – % | No – % |
|---|---|---|
| Micro | 11% | 89% |
| Small | 36% | 64% |
| Medium | 61% | 39% |
| Large | 71% | 29% |
| All private sector employers | 17% | 83% |
Base: all private sector employers.
Employers tended to either apply a postponement period to all newly eligible employees, or to a very small proportion. Almost two-thirds (64 per cent) of employers applied postponement periods for all newly eligible employees, while 16 per cent did so for up to five per cent of newly eligible employees (Figure 4.2). Larger employers were more likely to apply postponement periods to all newly eligible employees; this was the case for 84 per cent of medium-sized and 82 per cent of large employers, compared with 55 per cent of micro employers and 71 per cent of small employers. Over one in ten (14 per cent of) employers adopting a postponement period did not know what proportion of newly eligible employees this applied for; this was particularly the case for micro and small employers.
Figure 4.2 Proportion of new or newly eligible employees to whom a postponement period has been applied, by employer size, 2019
| Employer size | All employees – % | Zero to 5% of employees | More than 5% of employees | Don’t know |
|---|---|---|---|---|
| Micro | 55% | 25% | 2% | 18% |
| Small | 71% | 8% | 10% | 10% |
| Medium | 84% | 5% | 7% | 4% |
| Large | 82% | 3% | 9% | 6% |
| All adopting a postponement period | 64% | 16% | 6% | 14% |
Base: all private sector employers adopting a postponement period.
4.3. Costs of automatic enrolment
4.3.1. Increases in total pension contributions and administrative costs
Employers were asked if the introduction of automatic enrolment had resulted in an increase in the total pension contributions their organisation had to make. This question was asked of all employers, regardless of their current pension provision. Around two-fifths (39 per cent) of employers stated that automatic enrolment had resulted in an increase in the total pension contributions they had to make (Figure 4.3). However, this overall figure is driven by the responses given by micro employers, many of whom did not operate a workplace pension scheme, as discussed in Chapter 2.
If we instead focus solely on employers with a workplace pension scheme, just over three-fifths (63 per cent) of these employers stated that the introduction of automatic enrolment had resulted in an increase in total pension contributions (Figure 4.4). This is higher among small, medium and large employers, with around four-fifths of these employers reporting an increase, compared with just over half (53 per cent) of micro employers.
Figure 4.3 Increases in total pension contributions as a result of automatic enrolment, all private sector employers, by employer size, 2019.
| Employer size | Yes – % | No – % | Don’t know – % |
|---|---|---|---|
| Micro | 27% | 55% | 18% |
| Small | 78% | 16% | 6% |
| Medium | 83% | 11% | 6% |
| Large | 81% | 11% | 8% |
| All employers | 39% | 46% | 15% |
| Employment | 75% | 16% | 9% |
Base: all private sector employers.
Figure 4.4 Increases in total pension contributions as a result of automatic enrolment, employers with a workplace pension scheme, by employer size, 2019.
| Employer size | Yes – % | No – % | Don’t know – % |
|---|---|---|---|
| Micro | 53% | 32% | 15% |
| Small | 80% | 15% | 5% |
| Medium | 83% | 11% | 6% |
| Large | 82% | 11% | 7% |
| All employers | 63% | 26% | 12% |
| Employment | 80% | 13% | 8% |
Base: all private sector employers with a workplace pension scheme.
Employers were also asked to estimate how much it had cost their organisation to implement automatic enrolment in the last financial year. Respondents were instructed to include administrative costs and costs of paid for advice but not include the costs of making contributions to worker’s pensions.
Two-fifths (39 per cent) of employers did not know how much this had cost (Table 4.1). This percentage was higher among large employers, standing at 58 per cent, compared with 36 per cent of micro employers. Nevertheless, the proportion of employers who were unable to give a cost estimate was sizeable among employers in all sizebands. The figures given for average costs should therefore be interpreted with caution.
Three in ten (30 per cent of) employers stated they had incurred zero costs in implementing automatic enrolment in the last financial year. This was more common among micro employers, with 37 per cent of employers in this sizeband stating this to be the case, compared with 12 per cent of large employers. Among those employers that did estimate a cost (including those who reported zero cost), average costs varied considerably by employer size; micro employers reported a mean cost of £236, while this stood at £14,060 among large employers. These figures for mean costs appear to be driven by some employers with particularly high costs; median costs were lower.
Table 4.1 Financial costs of implementing automatic enrolment, by employer size, 2019.
| Average cost (£) (a), (b) | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers with a workplace pension scheme |
|---|---|---|---|---|---|
| Mean | 236 | 1,919 | 4,290 | 14,060 | 872 |
| Median | 0 | 86 | 1,458 | 4,647 | 15 |
| Weighted base | 745 | 319 | 24 | 4 | 1,093 |
| Unweighted base | 200 | 667 | 236 | 328 | 1,431 |
| Report zero cost (%) | 37 | 18 | 14 | 12 | 30 |
| Report cost of greater than zero (%) | 27 | 37 | 42 | 30 | 31 |
| Cost not known (%) | 36 | 45 | 44 | 58 | 39 |
| Weighted base | 218 | 671 | 405 | 1,481 | 2,775 |
| Unweighted base | 317 | 1,121 | 442 | 855 | 2,735 |
Base: All private sector employers with a workplace pension scheme.
Notes
(a). Calculated only among those respondents who reported a cost, including those employers who reported zero cost. If average costs are calculated solely among those employers who reported non-zero costs, the mean cost was £1,719, while the median cost was £500. (b). Includes costs of paid for advice but does not include costs of making pension contributions.
4.3.2. Strategies for dealing with increases in costs
Employers who stated they had experienced an increase in the total pension contributions their organisation had to make were asked about strategies they had taken to absorb this increased cost (Table 4.2). The most common strategy reported was that the cost had been absorbed as part of other overheads, stated by 68 per cent of employers[footnote 11]. More than half (54 per cent) of employers reported they had taken a reduction in profits, while around one in ten (13 per cent) reported that they had increased prices. Seven per cent said that they had implemented lower wage increases and a similar percentage (six per cent) had changed their existing pension scheme or reduced or re-structured their workforce (five per cent). Just one per cent of employers stated they had reduced contribution levels for existing members prior to the reforms. Fifteen per cent of employers reported that they had taken none of the listed actions.
Table 4.2 Employers’ strategies to absorb increase in total pension contributions, by employer size, 2019.
| Employers’ strategies | Micro (1-4) – % | Small (5-49) – % | Medium (50-249) – % | Large (250+) – % | All private sector employers reporting an increase in contributions – % |
|---|---|---|---|---|---|
| Absorbed as part of other overheads | 68% | 68% | 65% | 61% | 68% |
| Taken a reduction in profits | 53% | 56% | 53% | 42% | 54% |
| Increased prices | 10% | 17% | 18% | 14% | 13% |
| Lower wage increases | 3% | 11% | 12% | 10% | 7% |
| Changed existing pension scheme | 4% | 6% | 15% | 12% | 6% |
| Re-structured/reduced workforce | 3% | 6% | 6% | 5% | 5% |
| Reduced contribution levels for existing members prior to reforms | 2% | 0% | 2% | 2% | 1% |
| Other | 0% | 0% | 1% | 1% | 0% |
| None of these | 16% | 14% | 14% | 18% | 15% |
| Weighted base | 608 | 458 | 36 | 8 | 1,109 |
| Unweighted base | 185 | 892 | 355 | 666 | 2,098 |
Base: All private sector employers with a workplace pension scheme who reported an increase in total pension contributions.
Note
Respondents could give more than one response.
Employers’ strategies to absorb increases in total pension contributions were fairly similar across employers of all sizes, as shown in Table 4.2. However, larger employers were more likely to have changed their existing pension scheme, with 15 per cent of medium-sized employers and 12 per cent of large employers having done so, compared with four per cent of micro and six per cent of small employers. Micro employers were also less likely to have implemented lower wage increases.
Table 4.3 goes on to show, for the three most common actions taken, how employers’ strategies to absorb increase in costs varied by industry sector[footnote 12]. Taking a reduction in profits, for example, was more common for employers in accommodation and food service activities, and less common for employers in human health and social work, or in construction.
Table 4.3 Strategies to absorb increase in costs, by industry, 2019.
| Industry | Absorbed as part of other overheads | Taken a reduction in profits | Increased prices |
|---|---|---|---|
| C: Manufacturing | 72 | 55 | 18 |
| F: Construction | 55 | 49 | 22 |
| G: Wholesale and retail | 84 | 61 | 15 |
| I: Accommodation and food service | 54 | 65 | 23 |
| M: Professional, Scientific and technical activities | 72 | 59 | 3 |
| N: Administrative and support service activities | 76 | 58 | 19 |
| Q: Human Health and social care | 83 | 35 | 9 |
| All private sector employers reporting an increase in contributions | 68 | 54 | 13 |
Base: All private sector employers with a workplace pension scheme who reported an increase in total pension contributions.
4.3.3. Ease of complying with automatic enrolment duties
Employers have a number of activities they need to undertake to comply with automatic enrolment duties. For each of the tasks listed in Table 4.4, respondents were asked to say “how easy or hard it has been for your organisation to comply”, using a scale of one to ten. A score of one represents “very easy” with a score of ten representing “very hard”.
For communicating automatic enrolment to employees, processing opt-outs, declaring compliance with The Pensions Regulator, ongoing administration of the scheme and processing opt-ins, the mean score reported by employers was three. For assessing the workforce for eligibility, the mean score reported was two.
Average scores generally showed little variation by employer size, although on most aspects, median scores were typically one point lower on average for micro employers.
Table 4.4 Difficulty of complying with automatic enrolment duties, by employer size, 2019 – average score.
| Difficulty of complying with automatic enrolment duties | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers with a workplace pension scheme |
|---|---|---|---|---|---|
| Communicating automatic enrolment to your employees – Mean | 3 | 3 | 3 | 3 | 3 |
| Communicating automatic enrolment to your employees – Median | 1 | 2 | 2 | 2 | 2 |
| Assessing the workforce for eligibility – Mean | 2 | 2 | 2 | 3 | 2 |
| Assessing the workforce for eligibility – Median | 1 | 2 | 2 | 2 | 1 |
| Processing opt-outs – Mean | 3 | 3 | 3 | 3 | 3 |
| Processing opt-outs – Median | 1 | 2 | 3 | 2 | 2 |
| Declaring compliance with The Pensions Regulator – Mean | 3 | 3 | 3 | 3 | 3 |
| Declaring compliance with The Pensions Regulator – Median | 2 | 3 | 3 | 2 | 3 |
| On-going administration of the pension scheme, deductions and payment of contributions to the scheme – Mean | 3 | 3 | 3 | 3 | 3 |
| On-going administration of the pension scheme, deductions and payment of contributions to the scheme – Median | 2 | 3 | 3 | 3 | 2 |
| Processing opt-ins – Mean | 3 | 3 | 2 | 2 | 3 |
| Processing opt-ins – Median | 2 | 2 | 2 | 2 | 2 |
| Weighted base | 919 | 462 | 41 | 10 | 1,431 |
| Unweighted base | 240 | 912 | 413 | 822 | 2,387 |
Base: All private sector employers with a workplace pension scheme.
Note
Respondents were asked, “Employers have a number of activities they need to undertake to comply with automatic enrolment duties. I am going to read out some of them. Please tell me how easy or hard it has been for your organisation to comply, using a scale from one to ten (one being very easy and ten being very hard)”.
4.4. Types of scheme used for automatic enrolment
The prevalence of different types of pension scheme was reported in Chapter 2. Not all of these schemes will necessarily be used for automatic enrolment. For each scheme the employer offered, respondents were asked whether the scheme was currently being used for automatic enrolment for any workers[footnote 13].
Figure 4.5 shows the percentage of schemes used for automatic enrolment, by scheme type. More than four-fifths (84 per cent) of employers who were providing access to NEST reported that they were using NEST for automatic enrolment, as were 93 per cent of employers who provided access to Master Trust schemes other than NEST. Around two-thirds (65 per cent) of occupational schemes were used for automatic enrolment, while this applied for around three-quarters (74 per cent) of GPP schemes, and just under half (45 per cent) of stakeholder schemes.
Figure 4.5 Whether scheme used for automatic enrolment, by scheme type, 2019.
| Scheme type | Yes – % | No – % |
|---|---|---|
| Occupational | 65% | 35% |
| GPP | 74% | 26% |
| SHP | 45% | 55% |
| NEST | 84% | 16% |
| Master Trust | 93% | 7% |
Base: All schemes, excluding those where employer did not know if scheme used for automatic enrolment.
4.5. Employer contributions
The minimum contribution required as part of the workplace pension reforms has increased over time. The reforms initially required total minimum contributions of 2 per cent of a band of workers’ earnings, with employers required to make a minimum contribution of 1 per cent. It was this contribution rate that applied at the time of EPP 2017. In April 2018, the minimum contribution required rose to a total of 5 per cent (with a minimum of 2 per cent required from the employer), and in April 2019, increased again to a total of 8 per cent (with a minimum of 3 per cent required from the employer).
In EPP 2019, employers were asked whether their organisation had had to increase contributions to meet the minimum levels introduced in April 2019 (Figure 4.6). Around three-quarters of small, medium and large employers offering a workplace pension stated they had to increase contributions as a result (75 per cent, 72 per cent and 75 per cent respectively). This applied for around half (52 per cent) of micro employers with a workplace pension scheme.
Figure 4.6 Increase in contributions to meet April 2019 requirements, by employer size, 2019.
| Employer size | Yes – % | No – % | Don’t know – % |
|---|---|---|---|
| Micro | 52% | 35% | 13% |
| Small | 75% | 17% | 7% |
| Medium | 72% | 24% | 4% |
| Large | 75% | 23% | 2% |
| All employers | 60% | 29% | 11% |
| Employment | 73% | 23% | 3% |
Base: all private sector employers with a workplace pension scheme.
Employers were also asked about the contributions they had made in the last financial year, 2018/19; that is, prior to the increase in minimum contributions required in April 2019. For each pension scheme they offered, respondents were asked for the average percentage of pay contributed[footnote 14]. Based on these responses, Table 4.5 reports average employer contributions by scheme type. Averaged across all schemes, the mean employer contribution was equivalent to four per cent of gross pay, and the median employer contribution stood at three per cent of gross pay. Averaged across all members, the mean contribution was five per cent of pay, while the median contribution was three per cent of pay.
The median contribution in occupational schemes, stakeholder schemes, NEST and other Master Trust schemes was equivalent to three per cent of pay, while in GPP schemes this stood at five per cent of pay. Averaged across members, the median contribution received in GPP, stakeholder and master trust schemes stood at four per cent of pay, for occupational schemes this stood at six per cent, and for members of NEST this stood at three per cent.
Table 4.5 Average employer contributions, by scheme type, 2018/19 – Percentage of pay
All schemes
| All schemes | Occupational – DB | Occupational – DC | Occupational – All | GPP | SHP | NEST | Master Trust | All |
|---|---|---|---|---|---|---|---|---|
| All schemes – Mean | 4% | 5% | 4% | 7% | 5% | 3% | 5% | 4% |
| All schemes – Median | 3% | 4% | 3% | 5% | 3% | 3% | 3% | 3% |
| Weighted base | 230 | 95 | 520 | 537 | 156 | 646 | 194 | 1,809 |
| Unweighted base | 307 | 177 | 573 | 754 | 273 | 836 | 202 | 2,638 |
All members
| All members | Occupational – DB | Occupational – DC | Occupational – All | GPP | SHP | NEST | Master Trust | All |
|---|---|---|---|---|---|---|---|---|
| Mean | 12% | 7% | 9% | 5% | 5% | 4% | 4% | 5% |
| Median | 5% | 6% | 6% | 4% | 4% | 3% | 4% | 3% |
| Weighted base | 167 | 273 | 521 | 734 | 250 | 826 | 188 | 2,694 |
| Unweighted base | 246 | 161 | 480 | 718 | 262 | 804 | 189 | 2,453 |
Base: All schemes where the employer contributes for at least some employees and the average percentage contribution was known. The average employer contribution is computed over all schemes reporting a rate, including a small number where a contribution rate of zero was reported for the last financial year. Note that the estimates for “all” occupational schemes also include hybrid schemes and schemes where type was not known.
Table 4.6 also shows average employer contributions, but among schemes used for automatic enrolment only. On this basis, averaged across members, again the mean employer contribution stood at five per cent of gross pay and the median contribution stood at three per cent of pay.
Table 4.6 Average employer contributions, schemes used for automatic enrolment only, 2018/19 – Percentage of pay
| Automatic Enrolment schemes | Occupational – DB | Occupational – DC | Occupational – All | GPP | SHP | NEST | Master Trust | All |
|---|---|---|---|---|---|---|---|---|
| Mean | 3% | 4% | 3% | 5% | 4% | 3% | 4% | 4% |
| Median | 3% | 3% | 3% | 4% | 3% | 3% | 3% | 3% |
| Weighted base | 170 | 73 | 343 | 421 | 113 | 610 | 181 | 1,572 |
| Unweighted base | 134 | 127 | 297 | 594 | 194 | 801 | 185 | 2,071 |
| All members | Occupational – DB | Occupational – DC | Occupational – All | GPP | SHP | NEST | Master Trust | All |
|---|---|---|---|---|---|---|---|---|
| Mean | 7% | 6% | 7% | 5% | 5% | 4% | 4% | 5% |
| Median | 3% | 5% | 5% | 4% | 4% | 3% | 3% | 3% |
| Weighted base | 119 | 243 | 428 | 691 | 223 | 805 | 185 | 2,511 |
| Unweighted base | 127 | 119 | 279 | 564 | 187 | 774 | 174 | 1,978 |
Base: All schemes used for automatic enrolment, where the employer contributes for at least some employees and the average percentage contribution was known. The average employer contribution is computed over all schemes reporting a rate, including a small number where a contribution rate of zero was reported for the last financial year. Note that the estimates for “all” occupational schemes also include hybrid schemes and schemes where type was not known.
Employers may choose to contribute more than the minimum of three per cent that is required. Respondents were not asked directly if they were contributing more than the minimum at the point of the survey. Instead, as noted above (and in line with previous surveys in the series), EPP 2019 collected information on average contributions in the previous financial year (here 2018/19), and on this basis, overall, just over one in ten (13 per cent) of employers with a workplace pension scheme, had a scheme used for automatic enrolment where the average employer contribution was above three per cent (Figure 4.7). Given this is based on the average percentage of pay received, this does not necessarily mean that all scheme members were receiving a contribution of more than three per cent[footnote 15].
Large employers were more likely than smaller employers to be contributing more than three per cent (Figure 4.7). More than three-fifths (43 per cent) of large employers with a workplace pension scheme were, on average, contributing more than three per cent in a scheme used for automatic enrolment. This compared with 13 per cent of micro employers, and 10 per cent of small employers.
Figure 4.7 Employers contributing above the minimum, by employer size, 2019
| Employer size | Contributing – % |
|---|---|
| Micro | 13% |
| Small | 10% |
| Medium | 29% |
| Large | 43% |
| All employers | 13% |
| Employment | 32% |
Base: all private sector employers with a workplace pension scheme.
Average contributions of more than three per cent were most common among employers in human health and social work activities, with around one third (32 per cent) of employers in this sector, with a workplace pension scheme, contributing an average of more than the minimum. In contrast, this applied for just four per cent of employers with a workplace pension scheme in accommodation and food service activities and in arts, entertainment and recreation, and just one per cent of employers in the transportation and storage sector[footnote 16].
Employers contributing an average of more than three per cent (again, based on their responses for the average contribution in the previous financial year) were asked for their reasons for doing so (Table 4.7). The most common reason, given by around one third (34 per cent) of those employers contributing more than the minimum, was that they wanted to offer a better option for their employees. Just over one quarter (27 per cent) of employers stated they were already contributing above the minimum (before the automatic enrolment requirements were introduced)[footnote 17], while just over one fifth (22 per cent) said this was a decision made by the trustees.
Table 4.7 Reasons for contributing more than the minimum, by employer size – column percentages.
| Reasons | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All schemes with average employer contribution of more than 3 per cent |
|---|---|---|---|---|---|
| To offer a better option for our employees | (34%) | 35% | 29% | 23% | 34% |
| Already contributing above the minimum rate | (21%) | 37% | 49% | 37% | 27% |
| Decision made by the trustees | (26%) | 15% | 18% | 9% | 22% |
| To match other employers | (5%) | 13% | 19% | 13% | 8% |
| To gain maximum tax benefits | (7%) | 5% | 8% | 4% | 6% |
| To ensure a stable cost for the next few years | (4%) | 8% | 10% | 6% | 5% |
| To reduce the contribution made by employees | (2%) | 5% | 7% | 2% | 3 |
| Other | (22%) | 38% | 38% | 44% | 27% |
| None of these | (0%) | 1% | 2% | 2% | 0% |
| Weighted base | 372 | 142 | 36 | 16 | 567 |
| Unweighted base | 54 | 219 | 216 | 809 | 1,298 |
Base: All schemes where employer is contributing an average of more than three per cent.
Note
Respondents could give more than one response.
Some variation in reasons given was apparent according to scheme type (Table 4.8). Such variations will in part reflect variations in employer size, as discussed in Chapter 2, there is variation by employer size in the types of scheme offered. For occupational and SHP schemes, the most common reason given for contributing more than the minimum was that they were already doing so, applying for around half of such schemes (50 per cent and 47 per cent respectively). In contrast, this was the case for just six per cent of NEST schemes. Instead, among NEST schemes, the most common reason given was that this was a decision made by the trustees, applying for just over a third (36 per cent) of NEST schemes where the contribution was above three per cent. Among GPP schemes contributing more than the minimum, the most common reasons for doing so were to offer a better option for employees (stated by 57 per cent), followed by already contributing more than the minimum (stated by 37 per cent).
Table 4.8 Reasons for contributing more than the minimum, by scheme type – column percentages.
| Reasons | Occupational | GPP | SHP | NEST | Master Trust | All schemes with average employer contribution of more than 3 per cent |
|---|---|---|---|---|---|---|
| To offer a better option for our employees | 43% | 57% | 22% | 31% | (14%) | 34% |
| Already contributing above the minimum rate | 50% | 37% | 47% | 6% | (34%) | 27% |
| Decision made by the trustees | 9% | 15% | 6% | 36% | (14%) | 22% |
| To match other employers | 7% | 8% | 18% | 5% | (2%) | 8% |
| To gain maximum tax benefits | 5% | 21% | 4% | 5% | (1%) | 6% |
| To ensure a stable cost for the next few years | 6% | 9% | 1% | 6% | (0%) | 5% |
| To reduce the contribution made by employees | 4% | 6% | 1% | 3% | (1%) | 3% |
| Other | 19% | 25% | 30% | 30% | (37%) | 27% |
| None of these | 0% | 1% | 0% | (1%) | 0% | |
| Weighted base | 118 | 64 | 94 | 260 | 31 | 567 |
| Unweighted base | 562 | 155 | 387 | 125 | 69 | 1,298 |
Base: All schemes where employer is contributing an average of more than three per cent.
Note
Respondents could give more than one response.
4.6. Employers’ views on automatic enrolment
Employers were asked for their views on the advantages of automatic enrolment for employers. Respondents were read a list of possible advantages and asked to indicate which of these, if any, they considered to be the main benefit to their organisation (Table 4.9).
The most commonly reported advantages of automatic enrolment were that this was a tax efficient way of compensating employees (stated by 16 per cent), and that it helped to streamline pension provision (stated by 14 per cent). Around one in ten employers said that automatic enrolment helped with staff recruitment and retention (10 per cent), improves employee morale (nine per cent) and reduces administrative burden for employers (nine per cent). Around five per cent of employers mentioned other advantages. Three in ten (28 per cent of) employers stated there were no advantages, while one in ten (10 per cent) said they did not know.
Table 4.9 Main benefit of automatic enrolment to employers, by employer size – column percentages.
| Reasons | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers |
|---|---|---|---|---|---|
| Tax efficient way of compensating employees | 17% | 15% | 22% | 17% | 16% |
| Helps us streamline pension provision | 11% | 22% | 19% | 23% | 14% |
| Helps with staff recruitment and retention | 9% | 9% | 16% | 19% | 10% |
| Improves employee morale | 9% | 11% | 7% | 8% | 9% |
| Reduces administrative burden for employers | 9% | 9% | 9% | 8% | 9% |
| Benefit to employee/ encourages them to save more | 2% | 2% | 2% | 2% | 2% |
| Encourage better maintenance of employee records | 1% | 1% | 2% | 2% | 1% |
| It’s mandatory | 0% | 2% | 2% | 2% | 1% |
| Something else | 0% | 2% | 3% | 2% | 1% |
| No advantages | 30% | 22% | 16% | 14% | 28% |
| Don’t know | 11% | 5% | 4% | 4% | 10% |
| Weighted base | 2,308 | 605 | 45 | 10 | 2,968 |
| Unweighted base | 491 | 1163 | 541 | 863 | 2,968 |
Base: All private sector employers.
Some variation was apparent by employer size (Table 4.9). Micro employers were most likely to say there were no advantages, with this applying for 30 per cent of this group, compared with around one sixth of medium and large employers (16 per cent and 14 per cent respectively). While some advantages, such as reducing administrative burden, were cited by similar proportions of employers regardless of size, some advantages, such as helping with staff recruitment and retention, were more commonly mentioned by medium and large employers (19 per cent of large employers identified this as the main benefit, compared with nine per cent of micro and small employers).
4.7. Employers’ views on proposed changes to automatic enrolment
Employers were asked for their views on some proposed changes to the eligibility criteria and contribution rates for automatic enrolment[footnote 18]. Firstly, respondents were asked whether they agreed or disagreed with reducing the lower age limit for automatic enrolment from 22 to age 18 (Figure 4.8). More than two-thirds (68 per cent) of employers agreed with this proposal, while 17 per cent disagreed and the remaining 15 per cent neither agreed nor disagreed. Figure 4.8 shows that there was typically limited variation in these views by employer size.
Figure 4.8 Employers’ views: Reducing the lower age limit for AE from 22 to 18
| Employer size | Strongly agree | Slightly agree | Neither | Slightly disagree | Strongly disagree |
|---|---|---|---|---|---|
| All | 31% | 37% | 15% | 9% | 8% |
| Micro | 30% | 38% | 15% | 9% | 7% |
| Small | 32% | 34% | 13% | 9% | 12% |
| Medium | 33% | 34% | 12% | 12% | 8% |
| Large | 35% | 36% | 12% | 11% | 6% |
Base: all private sector employers.
Respondents were then asked whether they agreed or disagreed with calculating pension contributions from the first pound earned rather than the lower earnings limit, currently set at £6,136. Just over two-fifths (43 per cent) of employers agreed with this proposal, with a roughly similar proportion (37 per cent) disagreeing (Figure 4.9).
Figure 4.9 Employers’ views: Calculate pension contributions from first pound earned rather than lower earnings limit
| Employer size | Strongly agree | Slightly agree | Neither | Slightly disagree | Strongly disagree |
|---|---|---|---|---|---|
| All | 18% | 25% | 20% | 21% | 17% |
| Micro | 19% | 26% | 20% | 20% | 16% |
| Small | 17% | 21% | 17% | 25% | 20% |
| Medium | 12% | 26% | 22% | 21% | 19% |
| Large | 20% | 27% | 16% | 21% | 15% |
Base: all private sector employers.
Some employers may of course already be choosing to do both of the above. Those employers who were contributing more than the three per cent minimum were more likely to agree with both proposals (85 per cent agreed or strongly agreed with reducing the lower age limit for automatic enrolment, and 59 per cent agreed or strongly agreed with calculating pension contributions from the first pound earned rather than the lower earnings limit).
5. Opt-out, cessation and opt-in
Purpose
- This chapter explores opt-out rates, cessation of membership, and enrolment of non-eligible workers.
Key Findings
- Five per cent of private sector employers with a workplace pension scheme had enrolled at least some non-eligible workers into a scheme in the last financial year (2018/19). This was more common among larger employers, applying for 44 per cent of large firms compared with three per cent of micro firms. Overall, around one third (34 per cent) of employees worked for an employer where at least some non-eligible workers had been enrolled.
- In 67 per cent of schemes where at least some non-eligible employees had been enrolled, employees had actively asked to join the scheme, while for 19 per cent this was a result of a company policy to enrol everyone. In the remaining 14 per cent of such schemes this was due to some other reason.
- The overall opt-out rate stood at nine per cent in 2019. This is based on the number of workers who had opted out among those automatically enrolled in the last financial year. This is unchanged from the opt-out rate seen in 2017.
- The overall cessation rate stood at 19 per cent, based on employees who had ceased active membership among those automatically enrolled in the last financial year. In 2017, the equivalent figure stood at 16 per cent.
- Almost two-thirds (64 per cent) of employers reported not doing anything to encourage employees not to opt out or cease contributing. Where actions were taken, the most common action was to provide information about the scheme and its benefits, carried out by ten per cent of employers.
- Overall, six per cent of employers thought there had been an increase in the number of workers who had stopped saving as a result of the April 2019 increase in minimum contributions required. Medium-sized and large employers were more likely to think this was the case, with this applying for 13 per cent of medium-sized employers and 28 per cent of large employers.
5.1. Introduction
This chapter explores rates of opt-out and cessation following automatic enrolment into a qualifying pension scheme, as well as the enrolment of non-eligible employees.
The workplace pension reforms require employers to automatically enrol all eligible employees into a qualifying pension scheme. Employees may choose to opt out of the scheme within the first month of active membership. Employees who leave the scheme after this initial period are defined as having ceased active membership (this may occur due to leaving their job, or may be an active decision to stop saving into the pension scheme).
Employees who are not eligible for automatic enrolment may nevertheless request to opt-in to their employer’s pension scheme and employers are then obliged to enrol them and pay at least minimum contributions if they are earning above the lower earnings limit. In some other cases, employees may be enrolled as standard as part of their company policy (without having actively chosen to become a member).
This chapter begins by considering enrolment of non-eligible employees, including the reasons given for this. It then presents rates of opt out and cessation. The chapter also reports on actions taken by employers to encourage employees to stay in a pension scheme. Finally, employers’ views on whether they perceived an increase in workers stopping saving as a result of the April 2019 minimum contribution increase are reported.
5.2. Enrolment of non-eligible workers
Employers were asked whether, in the last financial year 2018/2019, any workers who were not eligible for automatic enrolment had been enrolled into the scheme they used for automatic enrolment. Respondents were instructed to include all ineligible workers enrolled, regardless of the reason why they had been enrolled. This could therefore include either those who had actively decided to join the scheme or those enrolled as a result of company policy.
Five per cent of employers with a workplace pension scheme had enrolled at least some non-eligible employees into a scheme in the last financial year. As shown in Figure 5.1, large and medium-sized employers were more likely than small and micro employers to have enrolled at least some non-eligible employees. More than two-fifths (44 per cent) of large employers and a quarter (26 per cent) of medium-sized employers had done so, compared with six per cent of small and three per cent of micro employers.
Figure 5.1 Employers where at least some non-eligible employees had been enrolled into a scheme in the last financial year, by employer size.
| Employer size | Number enrolled |
|---|---|
| Micro | 3 |
| Small | 6 |
| Medium | 26 |
| Large | 44 |
| All employers | 5 |
| Employment | 34 |
Base: all private sector employers with a workplace pension scheme.
As noted above, respondents were asked to include all non-eligible employees in their responses, regardless of the reason for their enrolment (Table 5.1). In those schemes where employers stated that at least some non-eligible employees had been enrolled, respondents were asked for the reasons for this. In around two-thirds (67 per cent) of such schemes, employees had actively asked to join the scheme, while in around one-fifth (19 per cent) it was company policy to enrol everyone. For the remaining 14 per cent of schemes where some non-eligible employees had been enrolled, employers stated that this was due to some other reason.
Table 5.1 Reasons for enrolment of non-eligible employees, by employer size – column percentages.
| Reasons for enrolment of non-eligible workers | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All schemes where non-eligible workers enrolled |
|---|---|---|---|---|---|
| It’s the company policy to enrol everyone | – | (22%) | 27% | 16% | 19% |
| They actively asked to join | – | (56%) | 61% | 78% | 67% |
| Some other reason | – | (22%) | 12% | 5% | 14% |
| Weighted base | – | 52 | 20 | 9 | 133 |
| Unweighted base | – | 95 | 110 | 401 | 615 |
Base: All schemes where at least some non-eligible workers had been enrolled in the last financial year.
Note
Estimates for micro employers are not presented due to fewer than 50 observations, but are included within the estimates for all employers.
5.3. Opt-out and cessation
5.3.1. Opt-out and cessation rates
The opt-out rate is calculated here as the number of employees who were automatically enrolled into a scheme in the last financial year (2018/2019), who opted out within a month. Overall, nine per cent of employees who were automatically enrolled in the last financial year had opted-out (Table 5.2). This is the same as the opt-out rate observed in 2017. There was generally little variation in opt-out rates by employer size (Table 5.2).
Table 5.2 Opt-out rates, by employer size – cell percentages.
| Average opt-out rate (mean) | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All |
|---|---|---|---|---|---|
| Employment-weighted estimates | 6% | 9% | 8% | 10% | 9% |
| Weighted base | 153 | 570 | 313 | 875 | 1,912 |
| Unweighted base | 228 | 947 | 346 | 552 | 2,073 |
Base: All private sector employers with a workplace pension scheme.
Employees who leave the scheme after the initial one-month opt-out period are referred to as having ceased active membership. Employees are considered to have ceased active membership if they leave the scheme due to leaving their employment or if they have actively decided to stop saving into the scheme for any other reason.
Employers were asked how many or their workers who were automatically enrolled into the qualifying pension scheme ceased active membership, leaving the scheme after one month. The cessation rate is calculated as the number of employees who were automatically enrolled into a scheme in the last financial year who had ceased active membership.
Overall, employers estimated that 19 per cent of employees who had been automatically enrolled in the last financial year had ceased active membership (Table 5.3). In 2017, the overall cessation rate stood at 16 per cent. Employers were also asked how many of those who had ceased active membership did so due to leaving their job; among those employers who were able to provide a number, on average, around two-thirds (65 per cent) of employees who had ceased saving did so because they had left their job.
Table 5.3 Cessation rates, by employer size – cell percentages.
| Cessation rates | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All |
|---|---|---|---|---|---|
| Employment-weighted estimates | 4% | 13% | 20% | 26% | 19% |
| Weighted base | 155 | 559 | 284 | 757 | 1,754 |
| Unweighted base | 230 | 929 | 318 | 474 | 1,951 |
Base: All private sector employers with a workplace pension scheme.
5.3.2. Actions to encourage employees not to opt out or cease membership
Employers were asked what actions they took, if any, to encourage employees not to opt out or cease contributing to the pension scheme. Almost two-thirds (64 per cent) of employers reported that they did not take any actions to encourage their employees to stay in the pension scheme (Table 5.4). In 2017, almost three-quarters (72 per cent) of employers were not taking any actions to encourage employees not to opt out or cease membership, but this figure is not directly comparable as in 2017 this question was only asked of those who had automatically enrolled employees.
In 2019, the most common actions were providing information about the scheme and its benefits, stated by one in ten (10 per cent of) employers, followed by communicating reasons for staying in the scheme (applying for seven per cent of employers) and highlighting the benefit of the employer contribution (stated by five per cent). Just over one in ten (13 per cent of) employers did not know if actions were taken.
Table 5.4 Activities undertaken by employers to encourage employees not to opt out or cease saving into a pension scheme, by employer size – cell percentages.
| Activities | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers |
|---|---|---|---|---|---|
| Do not do anything to encourage employees to remain in the scheme | 65% | 62% | 60% | 56% | 64% |
| Provide information about the scheme and its benefits | 9% | 14% | 15% | 19% | 10% |
| Communicate the reasons for staying in the scheme | 6% | 11% | 12% | 12% | 7% |
| Highlight the employer contribution as a benefit of staying in the scheme | 4% | 7% | 8% | 7% | 5% |
| Provide information about the value of the state pension | 2% | 4% | 8% | 5% | 3% |
| Encourage employees to access online information about the scheme | 2% | 3% | 3% | 3% | 2% |
| Explain how much their pension could be worth | 1% | 5% | 5% | 5% | 2% |
| Other | 3% | 3% | 6% | 9% | 3% |
| Don’t know | 15% | 5% | 2% | 4% | 13% |
| Not applicable | 1% | 2% | 0% | 0% | 1% |
| Weighted base | 2,308 | 605 | 45 | 10 | 2,968 |
| Unweighted base | 491 | 1163 | 451 | 863 | 2,968 |
Base: All private sector employers.
Note
Respondents could give more than one response.
Micro employers were less likely than larger employers to encourage employees to remain in a pension scheme, and they were also more likely to say that they did not know if any actions were taken to do this. In part, as observed earlier, this may be because micro employers were less likely to have a workplace pension scheme. However, even among micro employers who offered a workplace pension scheme, 63 per cent did not undertake any activities to encourage employees not to opt out or cease membership.
5.3.3. Employers’ views on incidence of cessation following increase in minimum contribution requirements
As discussed earlier in this report, in April 2019, the minimum contribution required under the workplace pension reforms increased. As contribution requirements change, it is important to monitor whether this may have had an impact on rates of cessation. Increases in minimum contributions could act to either increase cessation, if employees find it increasingly difficult to make increased contributions, encourage them to remain, as they see the benefit of receiving a higher contribution from their employer, or neither of these. The cessation rates presented earlier in this chapter related to the 2018/19 financial year. While they can therefore provide an insight into whether there were changes in cessation rates as a result of the April 2018 increase, these are measured prior to the April 2019 rise.
To explore whether the 2019 increase may have had an effect, survey respondents were therefore asked whether they thought there had been an increase in the number of workers who had decided to stop saving as a result of the April 2019 increase. Overall, six per cent of employers thought that this was the case (Figure 5.2). Four-fifths (82 per cent) thought there had been no increase in the number of workers stopping saving, while the remaining 13 per cent did not know.
Medium-sized and large employers were more likely to think there had been an increase in workers stopping saving; this applied for 13 per cent of medium-sized employers and 28 per cent of large employers, compared with eight per cent of small and five per cent of micro employers (Figure 5.2).
Figure 5.2 Employers’ views on incidence of cessation following increase in minimum contribution requirements, by employer size
| Employer size | Yes | No | Don’t know |
|---|---|---|---|
| Micro | 5% | 80% | 15% |
| Small | 8% | 87% | 5% |
| Medium | 13% | 83% | 4% |
| Large | 28% | 67% | 5% |
| All employers | 6% | 82% | 13% |
| Employment | 20% | 74% | 7% |
Base: all private sector employers.
Micro employers were also more likely than larger employers to say they did not know if there had been an increase; as before, this may partly reflect the lower prevalence of workplace pension schemes among this group. If views are considered based only on those employers with a workplace pension scheme, five per cent of all employers with a workplace pension scheme thought there had been an increase in the number of workers stopping saving, 88 per cent thought there had not been an increase, and seven per cent stated that they did not know.
6. Re-enrolment
Purpose
- This chapter reports on employers’ awareness and experiences of re-enrolment, including sources of advice and communications about re-enrolment, as well as opt-out and cessation rates following re-enrolment. It also considers preparations among employers yet to begin re-enrolment.
Key Findings
- Overall, 57 per cent of employers were aware of the requirement to automatically re-enrol their employees. Awareness was much higher among medium and large employers; 91 per cent of medium-sized employers and 97 per cent of large employers were aware.
- For micro and small employers, the most common source of advice about re-enrolment was an accountant (used by 49 per cent and 33 per cent respectively). For medium and large employers the most common source of advice was a pension provider, used by 49 per cent of medium-sized employers and 52 per cent of large employers.
- Around two-fifths (41 per cent) of employers who had passed their re-enrolment date had sent out communications about re-enrolment to their workers.
- The overall opt-out rate following re-enrolment stood at 35 per cent. While this indicates that opt-out following re-enrolment is higher than opt-out following initial automatic enrolment, it is notable that a sizeable proportion of employees do not choose to opt out following automatic re-enrolment.
- Among employers who had not yet passed their re-enrolment date, around one-sixth (15 per cent) had begun preparations for re-enrolment. Among employers who had not begun preparations, almost one quarter (23 per cent) had a plan in place for when they would begin preparing for re-enrolment.
6.1. Introduction
Re-enrolment refers to the process whereby employers are required to reassess the eligibility of their workforce, with staff who have opted out, ceased active membership or reduced their contributions below the minimum level to be assessed for re-enrolment. Employers must re-enrol any staff member who left the scheme more than 12 months before the re-enrolment date and meets the specified age and earnings criteria (and may also choose to re-enrol other staff members)[footnote 19]. Employers are required to undertake re-enrolment approximately three years after they first automatically enrolled their workforce. Employers must write to all employees to inform them that they have been automatically re-enrolled into the pension scheme and complete the re-declaration of compliance with The Pensions Regulator. EPP 2017 was the first survey in the EPP series to explore actions following re-enrolment among medium and large employers; at that time, only employers with 50 or more employees had passed their re-enrolment date. By the time of EPP 2019, many more employers had been through re-enrolment, and some employers had already undertaken re-enrolment for the second time.
This chapter begins by exploring employers’ awareness of re-enrolment. It then considers employers’ experiences of re-enrolment, including sources of information and advice used, communications with employees and the extent to which employees have opted out or ceased membership following re-enrolment. Finally, the chapter reports on preparations for re-enrolment among those employers who have not yet passed their re-enrolment date.
6.2. Awareness of re-enrolment
Respondents were asked whether they were aware that employers have to engage in re-enrolment three years on from when they first automatically enrolled their workers.
Overall, almost three-fifths (57 per cent) of employers were aware of this requirement (Figure 6.1)[footnote 20]. One in twenty (five per cent) of employers did not know if they were aware, with the remaining 38 per cent stating they were not aware. Most medium and large employers were aware of re-enrolment; this was the case for 97 per cent of large employers and 91 per cent of medium-sized employers. Around three-quarters (73 per cent) of small employers were aware, compared with around half (52 per cent) of micro employers.
Figure 6.1 Awareness of re-enrolment, by employer size
| Employer size | Yes | No | Don’t know |
| Micro | 52% | 42% | 6% |
| Small | 73% | 24% | 3% |
| Medium | 91% | 9% | 0% |
| Large | 97% | 3% | 0% |
| All employers | 57% | 38% | 5% |
| Employment | 86% | 12% | 1% |
Base: all private sector employers.
Table 6.1 presents awareness of re-enrolment by industry sector. Awareness was highest in the human health and social work sector (Section Q of the Standard Industrial Classification 2007), with four-fifths (80 per cent) of employers in this sector stating that they were aware. This was followed by employers in administrative and support service activities (Section N) (with 69 per cent aware). In contrast, just over a third (36 per cent) of employers in manufacturing (Section C) were aware of re-enrolment. Variation by industry will in part also reflect differences in employer size.
Table 6.1 Awareness of re-enrolment, by sector – cell percentages.
Industry sector: SIC(2007) Section (c)
| Awareness | C | F | G | H | I | J | K | L | M | N | Q | R | S | All private sector employers | Aware of re-enrolment | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | |
| Yes | 36% | 58% | 58% | (62%) | 59% | 41% | 53% | (61%) | 57% | 69% | 80% | (56%) | 58% | 57% | |||||||||||||||||
| No | 64% | 33% | 37% | (38%) | 36% | 49% | 36% | (37%) | 39% | 30% | 18% | (44%) | 39% | 38% | |||||||||||||||||
| Don’t know | 0% | 9% | 5% | (0%) | 6% | 10% | 10% | (2%) | 4% | 1% | 2% | (0%) | 3% | 5% | |||||||||||||||||
| Weighted base | 159 | 354 | 442 | 114 | 191 | 284 | 51 | 82 | 565 | 271 | 132 | 69 | 132 | 2,968 | |||||||||||||||||
| Unweighted base | 318 | 211 | 495 | 96 | 208 | 126 | 108 | 74 | 362 | 276 | 356 | 86 | 127 | 2,968 |
Base: All private sector employers.
Note
Sector labels are C: Manufacturing; F: Construction; G: Wholesale & retail; H: Transportation & storage; I: Accommodation & food service; J:Information & communication; K: Financial & insurance activities; L: Real estate; M: Professional, scientific & technical; N: Administrative & support service activities; Q: Human health & social work; R: Arts, entertainment & recreation; S: Other service activities. Sectors A, B, D, E, and P are not presented as they each contain fewer than 50 observations, but are included in the ‘All sectors’ column (full sector labels in Appendix Table A.1). Industry sectors with fewer than 50 observations are not presented individually but are included in the estimates for all employers.
6.3. Actions among employers who have passed their re-enrolment date
Almost one quarter (23 per cent) of employers stated that they had passed their re-enrolment date. Just over half (53 per cent) stated that they had not, while the remaining quarter (24 per cent) did not know. As medium and large employers were much more likely to have undertaken re-enrolment, around three-fifths (62 per cent) of employees worked for an employer who had stated they had passed their re-enrolment date.
Employers who reported that they had passed their re-enrolment date were asked about their experiences of re-enrolment. This section explores the sources of information and advice about re-enrolment used by employers, communications with employees and rates of opt-out and cessation following re-enrolment.
6.3.1. Sources of information and advice
Employers who stated they had passed their re-enrolment date were asked whether they had sought any information or advice about re-enrolment from a specified list of potential sources (Table 6.2). Overall, the most commonly used sources were an accountant, used by 43 per cent of employers, followed by The Pensions Regulator (used by 20 per cent of employers) and a pension provider (applying for 17 per cent of employers). Almost one quarter (23 per cent) of employers had not sought information or advice from any of these sources.
The most common sources of advice used varied by employer size. While an accountant was the most common source of information or advice for smaller employers, used by around half (49 per cent) of micro employers, and a third (33 per cent) of small employers, this applied for only nine per cent of large employers. Instead, for both medium-sized and large employers, the most commonly reported source of advice was a pension provider, used by around half of such employers (49 per cent of medium-sized employers and 52 per cent of large employers).
Table 6.2 Sources of advice or information on re-enrolment, by employer size – column percentages.
| Source | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All employers who have passed re-enrolment date |
|---|---|---|---|---|---|
| An accountant | 49% | 33 % | 21% | 9% | 43% |
| The Pensions Regulator | 18% | 22% | 37% | 43% | 20% |
| Pension provider | 10% | 27% | 49% | 52% | 17% |
| Payroll provider | 12% | 23% | 32% | 34% | 16% |
| Department for Work and Pensions | 16% | 14% | 17% | 12% | 16% |
| Her Majesty’s Revenue and Customs | 16% | 12% | 12% | 11% | 15% |
| An independent financial advisor | 11% | 8% | 17% | 14% | 10% |
| A bookkeeper | 6% | 9% | 5% | 2% | 7% |
| A lawyer/legal advisor | 7% | 2% | 3% | 7% | 5% |
| Trade industry body | 7% | 1% | 3% | 3% | 5% |
| An employee benefits consultant | 2% | 3% | 5% | 12% | 2% |
| Pension consultant/advisor | 0% | 0% | 1% | 1% | 0% |
| Other | 0% | 1% | 3% | 2% | 0% |
| None of these | 25% | 21% | 14% | 15% | 23% |
| Weighted base | 462 | 188 | 28 | 8 | 685 |
| Unweighted base | 116 | 426 | 307 | 681 | 1,530 |
Base: All private sector employers who had passed their re-enrolment date.
6.3.2. Communications regarding re-enrolment
Around two-fifths (41 per cent) of employers who had passed their re-enrolment date had sent out communications about re-enrolment to their workers (Figure 6.2). However, small, medium and large employers were much more likely than micro employers to have done so, with this applying for 62 per cent of small employers, 71 per cent of medium-sized organisations and 68 per cent of large employers. In contrast, three in ten (30 per cent of) micro employers had sent out communications about re-enrolment.
Figure 6.2 Communications sent to workers about re-enrolment, by employer size
| employer size | Yes – % | No – % |
|---|---|---|
| Micro | 30 | 70 |
| Small | 62 | 38 |
| Medium | 71 | 29 |
| Large | 68 | 32 |
| All private sector employers who had re-enrolled | 41 | 59 |
Base: All private sector employers who had passed their re-enrolment date.
Employers who stated that they had sent out communications about re-enrolment were asked what information they had provided (Table 6.3). The most common type of information provided was information about re-enrolment, cited by 65 per cent of employers who had sent out communications. This was followed by general information about automatic enrolment, which was provided by just over half (55 per cent). Around one quarter had provided information on contribution levels (26 per cent), scheme specific information (23 per cent) and eligibility criteria (23 per cent).
Table 6.3 Communications regarding re-enrolment, by employer size – column percentages.
| Type of re-enrolment information | Small (5-49) | Medium (50-249) | Large (250+) | All employers communicating about re-enrolment |
|---|---|---|---|---|
| Information about re-enrolment | 48% | 56% | 68% | 65% |
| Automatic enrolment information – general information | 58% | 54% | 52% | 55% |
| Automatic enrolment information – contribution levels | 27% | 27% | 33% | 26% |
| Automatic enrolment information – scheme specific information | 12% | 26% | 29% | 23% |
| Automatic enrolment information – eligibility criteria | 19% | 27% | 27% | 23% |
| Details about The Pensions Regulator | 13% | 17% | 18% | 16% |
| Details about where to go for advice or guidance | 12% | 22% | 26% | 16% |
| Information for employees already enrolled in the scheme | 13% | 17% | 15% | 16% |
| Letters | 4% | 2% | 1% | 2% |
| Opt-in opt-out options | 5% | 2% | 2% | 2% |
| Something else | 12% | 11% | 9% | 9% |
| None of these | 0% | 1% | 1% | 0% |
| Weighted base | 93 | 18 | 5 | 246 |
| Unweighted base | 212 | 198 | 427 | 880 |
Base: All private sector employers who had sent workers communications about re-enrolment.
Note
Figures for micro employers are not presented as these are based on fewer than 50 observations, but are included within the estimates for all employers. Respondents could give more than one response.
6.3.3. Opt-out and cessation following re-enrolment
Following automatic re-enrolment into a pension scheme, employees again have the option to opt out within the first month following re-enrolment, or may cease their membership after that period.
Employers were asked, based on their most recent re-enrolment cycle[footnote 21], how many of their workers had been automatically re-enrolled, and how many of these workers had opted out within one month. The overall opt-out rate following re-enrolment stood at 35 per cent (Table 6.4). This figure is similar to that observed in EPP 2017, when opt-out following re-enrolment stood at 33 per cent, however, this figure is not directly comparable as in 2017 this related only to medium and large employers. Opt-out levels following re-enrolment were higher than those following initial automatic enrolment, but it is notable that a sizeable proportion of workers do not opt out following re-enrolment, given this a largely a population who have opted out previously.
Table 6.4 Opt-out rate following re-enrolment, by employer size – column percentages.
| Opt-out rate (mean) | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All |
|---|---|---|---|---|---|
| Employment-weighted estimates (mean) | (20%) | 26% | 36% | 39% | 35% |
| Weighted base | 42 | 159 | 169 | 638 | 1,008 |
| Unweighted base | 65 | 267 | 190 | 399 | 921 |
Base: Private sector employers who had automatically re-enrolled workers
Cessation rates are calculated as the number of workers who ceased saving after one month of being automatically re-enrolled (again, based on the employer’s most recent re-enrolment process). Overall, the cessation rate following re-enrolment stood at 14 per cent (Table 6.5). However, it is worth noting that the period over which this would be measured would be different for different employers, as at the point of interview, some employers may have completed re-enrolment fairly recently, while for others this may have happened some time ago[footnote 22]. It should also therefore not be compared with the figures for cessation following initial automatic enrolment, as those figures are based, for all respondents, on the number of workers who had ceased saving of those who had been automatically enrolled in the last financial year[footnote 23].
Table 6.5 Cessation rate following re-enrolment, by employer size – column percentages.
| Average cessation rate (mean) | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All |
|---|---|---|---|---|---|
| Employment-weighted estimates (mean) | (12%) | 9% | 8% | 17% | 14% |
| Weighted base | 40 | 151 | 168 | 542 | 900 |
| Unweighted base | 64 | 262 | 182 | 349 | 857 |
Base: Private sector employers who had automatically re-enrolled workers
6.4. Preparations and plans among employers yet to pass their re-enrolment date
Employers who had not yet passed their re-enrolment date were asked about their plans and preparations for re-enrolment. Around one-sixth (15 per cent) of employers who had not passed their re-enrolment date stated that they had begun preparations for re-enrolment. The majority (78 per cent) had not done so, while seven per cent did not know (Figure 6.3). Micro employers were the least likely to have begun preparations, with 12 per cent having done so, compared with around one quarter (24 per cent) of small employers. A small number of medium and large employers stated that they had not passed their re-enrolment date at the time of the survey, but these employers were more likely than smaller employers to say that they had begun preparations (38 per cent and 41 per cent respectively).
Employers who stated that they had begun preparations were asked what they had done to prepare for re-enrolment. In response, thirteen per cent of this group stated that they had done nothing, while a further seven per cent did not know what this had involved. Just over one in ten (11 per cent) said they had researched requirements, while a similar proportion (10 per cent) said they had set calendar reminders. The majority (57 per cent) of respondents gave other, unspecified answers.
Figure 6.3 Preparations for re-enrolment, by employer size
| Employer size | Yes – % | No – % | Don’t know – % |
|---|---|---|---|
| Micro | 12% | 80% | 7% |
| Small | 24% | 69% | 7% |
| Medium | 38% | 54% | 8% |
| Large | 41% | 49% | 10% |
| All employers | 15% | 78% | 7% |
Base: all private sector employers who had not passed their re-enrolment date.
Note
Estimates for medium sized organisations are based on fewer than 100 observations.
Those employers who had not begun preparations for re-enrolment were asked if they had a plan for when they would do so. This was the case for around one quarter (23 per cent) of employers who had not begun preparations. The majority (71 per cent) did not have a plan, while six per cent did not know (Figure 6.4). Among those employers with a plan, almost three quarters (72 per cent) were planning to send out communications about re-enrolment to their employees.
Figure 6.4 Plan for when preparations for re-enrolment will begin, by employer size
| Employer size | Yes – % | No – % | Don’t know – % |
|---|---|---|---|
| Micro | 21% | 72% | 7% |
| Small | 32% | 66% | 2% |
| Medium to large | 46% | 46% | 7% |
| All employers | 23% | 71% | 6% |
Base: private sector employers who had not passed their re-enrolment date and who had not begun preparations for re-enrolment.
7. Summary and conclusions
This report has presented findings from the 2019 Employers’ Pension Provision Survey (EPP 2019). A principal aim of the report was to describe the extent and nature of pension provision among private sector employers in Britain in 2019. The report also provides insights into the ongoing effects of the workplace pension reforms. This short final chapter of the report provides a short commentary on some of the key findings.
Prior to the introduction of the workplace pension reforms, the proportion of private sector employers providing pensions had been declining since around the mid-2000s. This trend has been reversed since the introduction of the workplace pension reforms, such that in 2019, around three-fifths (62 per cent) of private sector employers provided a workplace pension scheme. In comparison, in 2013, one fifth (19 per cent) of employers offered a workplace scheme. Almost all non-providers in 2019 were micro employers, and accounted for a small share of employment. Overall, 94 per cent of employees worked for an organisation providing a workplace pension scheme.
The minimum contribution required as part of the workplace pension reforms has increased over time. As contributions have increased, it is important to consider whether this has affected employees’ decisions to opt out or cease saving. Overall however, the opt-out rate has remained unchanged since 2017 at nine per cent. There was some indication that the April 2019 increase in minimum contributions required may have prompted some rise in the number of workers stopping saving, with six per cent of employers stating they thought this has been the case. This will require continued monitoring over time.
Many employers report increases in costs as a result of the introduction of automatic enrolment, with most absorbing this either as part of other overheads or through taking a reduction in profits. Yet some employers do contribute above the minimum required, most commonly because they want to offer their employees a better option.
Opt-out rates following re-enrolment are higher than those seen following initial automatic enrolment. However, with an overall opt-out rate following re-enrolment of around 35 per cent, it is notable that a sizeable proportion of those re-enrolled are choosing not to opt out. Many employers are still yet to undergo re-enrolment for the first time, and again it will be important to continue to monitor opt-out over time.
Appendix A: Industry sectors
Appendix Table A.1: Industry sectors, SIC 2007
| Code | Industry sector: SIC(2007) Section |
|---|---|
| A: | Agriculture, forestry and fishing |
| B: | Mining and quarrying |
| C: | Manufacturing |
| D: | Electricity, gas, steam and air conditioning supply |
| E: | Water supply, sewerage and waste management |
| F: | Construction |
| G: | Wholesale and retail |
| H: | Transportation and storage |
| I: | Accommodation and food service |
| J: | Information and communication |
| K: | Financial and insurance activities |
| L: | Real estate activities |
| M: | Professional, scientific and technical activities |
| N: | Administrative and support service activities |
| P: | Education |
| Q: | Human health and social work |
| R: | Arts, entertainment and recreation |
| S: | Other service activities |
Appendix B: Tables to accompany figures – cell percentages.
Table B.1 Any pension provision, by employer size, 2013, 2017 and 2019 (Figures 2.1 and 2.2)
| Pension provision | Private sector employers 2013 | Private sector employers 2017 | Private sector employers 2019 | Employees working for such employers 2013 | Employees working for such employers 2017 | Employees working for such employers 2019 |
|---|---|---|---|---|---|---|
| Any pension provision (a) | 32% | 56% | 71% | 79% | 93% | 96% |
| Employer size | Private sector employers 2013 | Private sector employers 2017 | Private sector employers 2019 | Employees working for such employers 2013 | Employees working for such employers | Employees working for such employers 2019 |
|---|---|---|---|---|---|---|
| Micro (1-4 employees) | 26% | 45% | 63% | 24% | 54% | 69% |
| Small (5-49 employees) | 47% | 91% | 98% | 57% | 95% | 99% |
| Medium (50-249 employees) | 84% | 100% | 100% | 86% | 99% | 100% |
| Large (250+ employees) | 96% | 100% | 100% | 99% | 100% | 100% |
| Pension provision | Private sector employers 2013 | Private sector employers 2017 | Private sector employers 2019 | Employees working for such employers 2013 | Employees working for such employers 2017 | Employees working for such employers 2019 |
|---|---|---|---|---|---|---|
| Any workplace pension scheme (b) | 19% | 47% | 62% | 76% | 91% | 94% |
| Employer size | Private sector employers 2013 | Private sector employers 2017 | Private sector employers 2019 | Employees working for such employers 2013 | Employees working for such employers 2017 | Employees working for such employers 2019 |
|---|---|---|---|---|---|---|
| Micro (1-4 employees) | 9% | 35% | 51% | 8% | 43% | 61% |
| Small (5-49 employees) | 41% | 89% | 97% | 51% | 92% | 97% |
| Medium (50-249 employees) | 80% | 98% | 98% | 83% | 98% | 98% |
| Large (250+ employees) | 96% | 99% | 99% | 99% | 100% | 100% |
Base: All private sector employers as indicated by row headings. Unweighted base for estimates for all employers is 3,043 in 2013, 2,713 in 2017 and 2,948 in 2019.
Notes
(a). ‘Any pension provision’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to the NEST scheme, access to a Master Trust scheme (other than NEST) and to arrangements whereby employers make contributions to employees’ personal pensions. Access to a Master Trust scheme other than NEST is not included in the 2013 figures as this information is not available in the 2013 data
(b). ‘Any workplace pension scheme’ refers to the provision of an occupational scheme, a GPP scheme, a workplace-based SHP scheme, access to the NEST scheme or access to a Master Trust scheme (other than NEST). It thus excludes contributions to personal pensions.
Table B.2 Employers adopting a postponement period for new employees, by employer size, 2019 (Figure 4.1) – column percentages.
| Postponement period | Micro Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers |
|---|---|---|---|---|---|
| Yes – % | 11% | 36% | 61% | 71% | 17% |
| No – % | 89% | 64% | 39% | 29% | 83% |
| Weighted base | 2,117 | 562 | 42 | 10 | 2,730 |
| Unweighted base | 453 | 1,093 | 426 | 832 | 2,804 |
Base: All private sector employers.
Table B.3 Proportion of new or newly eligible employees to whom a postponement period has been applied, by employer size, 2019 (Figure 4.2) – column percentages.
| Postponement period | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All adopting a postponement period |
|---|---|---|---|---|---|
| Postponement period applied to all new or newly eligible employees | (55%) | 71% | 84% | 82% | 64% |
| Postponement period applied to zero to five per cent of new or newly eligible employees | (25%) | 8% | 5% | 3% | 16% |
| Postponement period applied to more than five per cent and less than 100 per cent of new or newly eligible employees | (2%) | 10% | 7% | 9% | 6% |
| Don’t know | (18%) | 10% | 4% | 6% | 14% |
| Weighted base | 235 | 203 | 26 | 7 | 471 |
| Unweighted base | 64 | 461 | 262 | 604 | 1,391 |
Base: All private sector employers which have adopted a postponement period.
Table B.4 Increases in total pension contributions as a result of automatic enrolment, all private sector employers, by employer size, 2019 (Figure 4.3) – column percentages.
| Increase | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All |
|---|---|---|---|---|---|
| Yes | 27% | 78% | 83% | 81% | 39% |
| No | 55% | 16% | 11% | 11% | 46% |
| Don’t know | 18% | 6% | 6% | 8% | 15% |
| Weighted base | 2,308 | 605 | 45 | 10 | 2,968 |
| Unweighted base | 491 | 1,163 | 451 | 863 | 2,968 |
Base: All private sector employers.
Table B.5 Increases in total pension contributions as a result of automatic enrolment, employers with a workplace pension scheme, by employer size, 2019 (Figure 4.4) – column percentages.
| Increase | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All with a workplace pension scheme |
|---|---|---|---|---|---|
| Yes | 53% | 80% | 83% | 82% | 63% |
| No | 32% | 15% | 11% | 11% | 26% |
| Don’t know | 15% | 5% | 6% | 7% | 12% |
| Weighted base | 218 | 671 | 405 | 1,481 | 2,775 |
| Unweighted base | 317 | 1,121 | 442 | 855 | 2,735 |
Base: All private sector employers with a workplace pension scheme.
Table B.6 Whether scheme used for automatic enrolment, by scheme type, 2019 (Figure 4.5) – column percentages.
| Scheme used | Occupational | GPP | SHP | NEST | Master Trust |
|---|---|---|---|---|---|
| Yes | 65% | 74% | 45% | 84% | 93% |
| No | 35% | 26% | 55% | 16% | 7% |
| Weighted base | 647 | 860 | 366 | 1,317 | 270 |
| Unweighted base | 685 | 853 | 378 | 1,347 | 268 |
Base: All schemes, excluding those where employer did not know if scheme used for automatic enrolment.
Table B.7 Increase in contributions to meet April 2019 requirements, by employer size, 2019 (Figure 4.6) – column percentages.
| Increase | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers with a workplace pension scheme |
|---|---|---|---|---|---|
| Yes | 52% | 75% | 72% | 75% | 60% |
| No | 35% | 17% | 24% | 23% | 29% |
| Don’t know | 13% | 7% | 4% | 2% | 11% |
| Weighted base | 218 | 671 | 405 | 1,481 | 2,775 |
| Unweighted base | 317 | 1,121 | 442 | 855 | 2,735 |
Base: All private sector employers with a workplace pension scheme.
Table B.8 Employers contributing above the minimum, by employer size, 2019 (Figure 4.7) – column percentages.
| Contributing | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers with workplace pension scheme |
|---|---|---|---|---|---|
| Contributing | 13% | 10% | 29% | 43% | 13% |
| Weighted base | 218 | 671 | 405 | 1,481 | 2,775 |
| Unweighted base | 317 | 1,121 | 442 | 855 | 2,735 |
Base: All private sector employers with a workplace pension scheme.
Table B.9 Employers’ views: Reducing the lower age limit for AE from 22 to 18 (Figure 4.8) – column percentages.
| Reduce lower age limit | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All |
|---|---|---|---|---|---|
| Strongly agree | 30% | 32% | 33% | 35% | 31% |
| Slightly agree | 38% | 34% | 34% | 36% | 37% |
| Neither agree nor disagree | 15% | 13% | 12% | 12% | 15% |
| Slightly disagree | 9% | 9% | 12% | 11% | 9% |
| Strongly disagree | 7% | 12% | 8% | 6% | 8% |
| Weighted base | 2,308 | 605 | 45 | 10 | 2,968 |
| Unweighted base | 491 | 1,163 | 451 | 863 | 2,968 |
Base: All private sector employers.
Table B.10 Employers’ views: Calculate pension contributions from first pound earned rather than lower earnings limit (Figure 4.9) – column percentages.
| Calculate pension contribution | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All |
|---|---|---|---|---|---|
| Strongly agree | 19% | 17% | 12% | 20% | 18% |
| Slightly agree | 26% | 21% | 26% | 27% | 25% |
| Neither agree nor disagree | 20% | 17% | 22% | 16% | 20% |
| Slightly disagree | 20% | 25% | 21% | 21% | 21% |
| Strongly disagree | 16% | 20% | 19% | 15% | 17% |
| Weighted base | 2,308 | 605 | 45 | 10 | 2,968 |
| Unweighted base | 491 | 1,163 | 451 | 863 | 2,968 |
Base: All private sector employers.
Table B.11 Employers where at least some non-eligible employees had been enrolled into a scheme in the last financial year, by employer size (Figure 5.1) – column percentages.
| Enrolled | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All |
|---|---|---|---|---|---|
| Employers where at least some non-eligible employees enrolled | 3% | 6% | 26% | 44% | 5% |
| Weighted base | 1,171 | 579 | 44 | 10 | 1,803 |
| Unweighted base | 317 | 1,121 | 442 | 855 | 2,735 |
Base: All private sector employers with a workplace pension scheme.
Table B.12 Employers’ views on incidence of cessation following increase in minimum contribution requirements, by employer size (Figure 5.2) – column percentages.
| Increase in workers who stopped saving | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers |
|---|---|---|---|---|---|
| Yes | 5% | 8% | 13% | 28% | 6% |
| No | 80% | 87% | 83% | 67% | 82% |
| Don’t know | 15% | 5% | 4% | 5% | 13% |
| Weighted base | 2,308 | 605 | 45 | 10 | 2,968 |
| Unweighted base | 491 | 1,163 | 451 | 863 | 2,968 |
Base: All private sector employers.
Table B.13 Awareness of re-enrolment, by employer size (Figure 6.1) – column percentages.
| Aware of re-enrolment | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers |
|---|---|---|---|---|---|
| Yes | 52% | 73% | 91% | 97% | 57% |
| No | 42% | 24% | 9% | 3% | 38% |
| Don’t know | 6% | 3% | 0% | 0% | 5% |
| Weighted base | 2,308 | 605 | 45 | 10 | 2,968 |
| Unweighted base | 491 | 1163 | 451 | 863 | 2,968 |
Base: All private sector employers.
Table B.14 Communications sent to workers about re-enrolment, by employer size (Figure 6.2) – column percentages
| Communication sent out | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers who had re-enrolled |
|---|---|---|---|---|---|
| Yes | 30% | 62% | 71% | 68% | 41% |
| No | 70% | 38% | 29% | 32% | 59% |
| Weighted base | 454 | 175 | 28 | 8 | 665 |
| Unweighted base | 114 | 411 | 300 | 683 | 1,508 |
Base: All private sector employers who had passed their re-enrolment date.
Table B.15 Preparations for re-enrolment, by employer size (Figure 6.3) – column percentages.
| Begun preparations | Micro (1-4) | Small (5-49) | Medium (50-249) | Large (250+) | All private sector employers |
|---|---|---|---|---|---|
| Yes | 12% | 24% | (38%) | 41% | 15% |
| No | 80% | 69% | (54%) | 49% | 78% |
| Don’t know | 7% | 7% | (8%) | 10% | 7% |
| Weighted base | 1,227 | 324 | 11 | 1 | 1,563 |
| Unweighted base | 265 | 579 | 85 | 100 | 1,029 |
Base: All private sector employers who had not passed their re-enrolment date.
Table B.16 Plan for when preparations for re-enrolment will begin, by employer size (Figure 6.4) – column percentages.
| Plan to begin | Micro (1-4) | Small (5-49) | Medium and large (50+) | All private sector employers |
|---|---|---|---|---|
| Yes | 21% | 32% | (46%) | 23% |
| No | 72% | 66% | (46%) | 71% |
| Don’t know | 7% | 2% | (7%) | 6% |
| Weighted base | 988 | 224 | 7 | 1,218 |
| Unweighted base | 203 | 381 | 88 | 672 |
Base: Private sector employers who had not passed their re-enrolment date and who had not begun preparations for re-enrolment.
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For the tax year 2019/2020, the lower qualifying earnings threshold was £6,136 and the upper qualifying earnings threshold was £50,000. ↩
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Under automatic enrolment individuals and their employers must contribute above a certain minimum amount based on a band of earnings – between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL). The 2019/20 levels for the LEL and UEL were £6,136 and £50,000 respectively. ↩
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See further details on assessing staff for re-enrolment ↩
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TPR (2020). Automatic enrolment declaration of compliance report, February 2020 ↩
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We do not present comparisons with the 2015 survey, as in 2015 the survey used an alternative sampling frame (see section 1.3). We therefore have greater confidence in the robustness of comparisons with 2017 and 2013 ↩
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Data tables for Figures 2.1 and 2.2 are presented in Appendix B. ↩
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ONS (2020) Employee workplace pensions in the UK: 2019 provisional and 2018 final results Statistical Bulletin ↩
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DWP (2019) Workplace Pension Participation and Savings Trends of Eligible Employees Official Statistics: 2008 to 2018 ↩
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Estimates for Section L and Section R should be treated with particular caution as they are each ↩
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This does not count all those who may also have offered another form of occupational scheme alongside the defined benefit scheme. ↩
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Respondents who cited this as a strategy were then asked a follow-up question to ask in what ways this had been done; these responses are back-coded into the estimates presented in Table 4.6. ↩
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Only estimates for industries with more than 100 observations are reported. ↩
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Where employers offered access to more than three occupational schemes, more than three stakeholder schemes, or more than three GPP schemes, they were only asked about their three largest schemes of each type. This accounts, however, for the vast majority of schemes. ↩
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Respondents were asked, “Considering contributions made for all members of this pension scheme, what would you say was the average percentage of pay your organisation contributed in the last financial year? Interviewers were instructed to add, if necessary, “By percentage of pay, I mean contributions to this scheme that are paid as a percentage of workers’ gross salary, such as 3% or 4%.” The automatic enrolment legislation requires employers to contribute a minimum of three per cent on a band of employees’ earnings; thus it is possible that contributions of lower than three per cent of total pay were still compliant with requirements. ↩
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This could also represent a contribution of more than the minimum required under automatic enrolment, where the employer contributed three per cent of more than just qualifying earnings. ↩
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Estimates for both arts, entertainment and recreation, and for transportation and storage, should be treated with particular caution as these are based on fewer than 100 observations. ↩
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The response option implies contributing above the minimum prior to the introduction of automatic enrolment, but does not explicitly state the time period being referred to. ↩
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See chapter 3 of DWP (2017) Automatic Enrolment Review 2017: Maintaining the Momentum ↩
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See further details on assessing staff for re-enrolment ↩
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In 2017, 62 per cent of staged employers were aware of re-enrolment. While this indicates broad stability, figures for 2017 are not directly comparable, as in 2017 this question was asked only of employers who stated that they had passed their staging date. In 2019, this question is instead asked of all employers. ↩
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Around one fifth (21 per cent) of employers who had re-enrolled, had passed their second re-enrolment date. ↩
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Respondents were not asked when they had undertaken their last re-enrolment cycle. ↩
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Though note that cessation rates for those automatically enrolled in the last financial year may also be based on varying time periods, as employers will inevitably have been interviewed at different times. However, there would be less potential variation in the time over which this is captured compared with the figures for re-enrolment, due to much greater variation in when re-enrolment will have taken place for different employers. ↩