Research carried out by the Association found that a lack of trust in the industry may be the main cause of opt-outs. A further 35 per cent said they could not afford the contributions, while 23 per cent said they did not trust the Government on pensions.
“Quitting a workplace pensions can mean losing tax breaks and employer contributions which are, in effect, ‘free money,’” commented Joanne Segars, Chief Executive of NAPF. “The weak economy and rollercoaster stock market may have put many off pensions, but there are also growing doubts about whether a pension is good value, and these need addressing.”
Zoe Lynch, Partner at Sacker & Partners, believes that these opt-out figures could leave many future retirees in poverty. If the reasons behind low take-up rates are not addressed the problem will only be magnified in future.
“If fundamental lack of trust is to blame, the pensions industry must make strides to better understand and to engage with the public. The possibility of a low take-up could drive up charges, which are already a potentially damaging subject for the industry,” she added.
The findings also showed that more than half of employees are not confident in pensions compared to alternative methods of saving. Only 37 per cent said they are confident, producing an Index of minus 17 per cent.
This is the lowest Pensions Confidence Index score since it began in 2007. The results have raised concerns over the potential success of auto-enrolment which is due to begin in October 2012.