A new study has been published by the Pensions Policy Institute that aims to highlight how individuals will be affected if they choose to opt out of the government's auto-enrolment initiative.

When the scheme comes into force in October next year, companies will be required to sign eligible staff members up to a qualifying workplace pension arrangement.

If a median-earning individual was enrolled into the National Employment Savings Trust and made the minimum contribution for their entire working life they would have funds totalling £93,600 when they reached state pension age (SPA).

The employee would receive a tax-free lump sum of £23,400 upon retirement and could purchase a single-life, level annuity worth £3,850 a year after tax.

However, if the individual opted out of the auto-enrolment scheme for the first ten years of employment, they would have £18,800 less upon reaching SPA.

Their tax-free lump sum would also fall by 20 per cent to £18,700, while the post-tax annuity would decline to £3,100 a year.

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