From the blog: The Public Accounts Committee has launched an inquiry into the risks associated with registering smaller employers for auto-enrolment and how this translates into higher retirement incomes for members.
A National Audit Office report published on Monday homed in on the work that needs to be done to make the policy fit for the future.
The easy gains have been made since October 2012's launch and everything has gone relatively smoothly: by August this year, 5.4m people were enrolled into new 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.
A National Audit Office report published on Monday homed in on the work that needs to be done to make the policy fit for the future.
The easy gains have been made since October 2012's launch and everything has gone relatively smoothly: by August this year, 5.4m people were enrolled into new 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.
AE is an important first step…
The programme has been successful partly because each body involved – the Department for Work and Pensions, the Pensions Regulator and the National Employment Savings Trust – has “a clear understanding of their roles and developed stable working relationships”, the report said.
These 1.8m employers are likely to behave differently from their larger peers, while their sheer number is bound to stretch the operations of the regulator, to put it mildly
The phased introduction has been another contributing factor, as it has “allowed time to test assumptions and refine processes”.
But the future for auto-enrolment holds “significant risks”. The rollout to 1.8m small and micro employers is uncharted territory.
These 1.8m employers are likely to behave differently from their larger peers, while their sheer number is bound to stretch the operations of the regulator, to put it mildly.
But the tax department's 'real-time information' system could be part of the solution.
To prepare for these pending pressures and to help target and monitor employers, the NAO recommends the regulator speed up the introduction of an RTI feed from HMRC, as well as “strengthen an integrated intelligence function about user behaviour” in tandem with the DWP.
…but links with wider retirement aims need to be reviewed
While auto-enrolment has been a success in the shorter term it will not guarantee that people have a retirement free of financial worries.
The report warns:
Source: NAO
In addition, the impact of other pension policies – most notably freedom and choice – on auto-enrolment remains unclear and the report recommends the DWP “monitor emerging trends and concerns, paying particular attention to the responses of employers and scheme trustees”.
A DWP review of auto-enrolment is due in 2017.
