An "emergency pause" could be triggered if auto-enrolment frameworks become overwhelmed by surging demand, but industry commentators say the government’s contingency plan “damages the momentum” behind the rollout of the initiative.
Three years have passed since the auto-enrolment programme kicked off and some larger employers have already undertaken re-enrolment processes.
According to a National Audit Office paper released earlier this month, the roll-out of the policy to date has been broadly successful.
You would expect the DWP to have worked through a number of scenarios that it could deploy in emergency situations, but there seems no need for any action at this time
Morten Nilsson, Now Pensions
By August this year, 5.4m people had been enrolled into workplace pensions, opt-out rates were much lower than anticipated (8-14 per cent instead of 28 per cent), and nearly all employers (99 per cent) were compliant.
However, the paper stated that “success in automatic enrolment does not necessarily mean that the [Department for Work and Pensions] will achieve the more fundamental objectives of increasing retirement incomes or improving economic outcomes” and called for a review of the link between auto-enrolment and the government's broader aims to improve levels of retirement saving across the UK.
Damaging momentum
It also revealed the government has undertaken contingency planning and created an emergency pause procedure to be activated if the AE programme becomes overwhelmed by unexpected demands or increases in capacity.
Adrian Boulding, policy strategy director at the Tax Incentivised Savings Association, said the contingency plan is “unhelpful” to the positive forces that have built up behind the programme.
“I don’t think there is the remotest chance it’s going to need to be activated, in fact it is quite unhelpful the NAO decided to draw attention to it,” he said.
“We’ve got a momentum going, it is happening, all the employers know it is happening and that’s an important part of the wholesale belief of this country in auto-enrolment.”
Ferdinand Lovett, senior associate at law firm Sackers, said the last-resort measure was recognition of the “step change” in the type of employer now coming “on stream” with auto-enrolment.
“It’s not just the fact there are more of them,” he said. “By nature, [small employers] will be very different beasts.”
Immense confusion
Morten Nilsson, chief executive officer at mastertrust Now Pensions, said that while the roll-out of auto-enrolment has been incredibly smooth, the biggest challenges for the programme were still to come.
“Moving the goal posts at this stage of the game has the potential to cause immense confusion for all concerned,” he said.
“The DWP has reiterated its commitment to the existing timetable and the pensions minister has made it clear that auto-enrolment will apply to those that only employ one member of staff, such as nannies and carers.
"You would expect the DWP to have worked through a number of scenarios that it could deploy in emergency situations but there seems no need for any action at this time.”
Nilsson said support for smaller employers will be critical to continued auto-enrolment success.
“As the vast majority [of smaller employers] have no experience of pensions, they are nervous about the practicalities of introducing a scheme.”
