Increasing pension participation rates through automatic enrolment: a critique of firm size

Abstract

This paper focuses on the question: “Will automatic enrolment (AE) legislation impact on the participation rates for small firms?” We develop a model to explain why large organisations are more likely to offer pensions as a benefit than small organisations that includes background conditions and motivating factors. We also consider differences between the employees of large and small organisations. Building on the work of Willis (2013) we suggest that for large organisations voluntarily offering pensions as a benefit, the interests of government, pension providers, employers and employees are aligned leading to higher pension participation rates. However, we argue that legislation requiring AE in all firms will not be strong enough to overcome the unaligned interests of these stakeholders. Therefore, we predict that AE will not significantly improve the participation rates for small firms.