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In the UK, employers are required by law to automatically enrol most employees in a workplace pension. I've recently been autoenroled in such a scheme. However, I'm conscious of the fact that the space of employee pension providers contains companies who are... not entirely reputable. For instance:

  • The BBC reports that most of these companies are "too small to survive" and that the regulator fears a "mass failure" of the schemes, after which "the members' money won't be protected".

  • Perhaps worse still, at least some of these companies seem to have engaged in outright dishonesty. For instance:

    • The same article linked above accuses My WorkPlace Pension of "providing misleading information online" - specifically, claiming "to have £50m of pensions under management, handled by the respected city firm Old Mutual" when in reality they "had no such assets at all."
    • Smart Pension Ltd has been dinged two times (first, second) by the ASA for apparently sending out "adverts" that presented themselves as government communications, complete with government logos, instructing employers to enrol on Smart Pension's website to avoid penalties.

In theory there's an economic benefit to me not opting out of the scheme - that my employer has to make contributions to it out of their pocket, additional to my salary. If I opt out, I am essentially voluntarily turning down thousands of pounds per year of additional compensation from my employer. But putting everything above together, it seems like there is a real risk that if I don't opt out, my employer and I will together pay a sum of 8% of my salary to a bunch of crooks, all of which will have disappeared by the time I retire and want to withdraw any of it. If that's the case, then obviously I should opt out.

Is this fear reasonable? If so, how should I proceed? What can I do, as an employee, to determine whether the scheme that my company has autoenroled me in can be trusted, and so decide whether to remain enroled or opt out?

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  • Are you asking whether it is worth being skeptical generally of pension scheme providers, or how to investigate one you have reason to suspect may be dishonest or prone to failure? Do you know which company your employer intends to use, i.e. is this concern based on a specific example of a provider?
    – marktristan
    May 23, 2019 at 9:03
  • Bear in mind that artivle is from three years ago when auto enrolment was still pretty much in its infancy. I would imagine things are better now - I can't find such concerns being expressed recently.
    – AakashM
    May 23, 2019 at 9:09
  • @marktristan Yes - I know the provider. What I don't know is how to evaluate them.
    – Mark Amery
    May 23, 2019 at 9:27
  • Why don't you tell us who the provider is and see what comments you get? There's been questions asked here about the solvency of specific schemes before. Also: pensions are usually pretty transferable these days... if you're that worried, every year or so transfer the value in the risky scheme to a more reputable provider you trust (and note that a red-flag for a dodgy scheme would be that they make transfers difficult or prohibitively expensive).
    – timday
    May 23, 2019 at 21:00
  • @timday "Why don't you tell us who the provider is and see what comments you get?" - it seems more useful to keep this broadly applicable. "pensions are usually pretty transferable" - eh... but are they? Some Googling suggests that providers can charge "transfer fees"; Smart Pension suggests at autoenrolment.co.uk/news/… that for some schemes the fee to transfer out can be 50% of the value of the pension. And even if there's nominally no fees, it sounds like providers can play tricks with how they calculate the "transfer value".
    – Mark Amery
    May 28, 2019 at 9:57

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It's a reasonable fear, but by opting out, you could be losing a lot of money when you retire.

The big advantage of workplace pensions are the employer's contributions. They are effectively free money to you, added to your pension fund. These contributions can make a mediocre company pension better than a really good private pension.

The fears mostly surround the pension funds set up when small employers were told they had to start offering a pension. The managers will have had no experience of pension schemes, and may have gone with any provider who offered to set one up. Larger companies will already have a scheme, and may have many millions invested. They will also have trustees scrutinizing the pension provider to make sure they are doing a good job.

Somebody at the company should be responsible for the pension scheme. You should talk to them before you make the decision.

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