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  • December 2015
12

MPs launch auto-enrolment inquiry

Open-access content 16th December 2015

The Work and Pensions Committee has launched an inquiry into the implementation of automatic enrolment.

2

The committee will be investigating the effects on small and micro employers. 

In particular, it will look at the effectiveness of the programme; the impact on these employers and how they plan to mitigate negative effects; support from the Department for Work and Pensions for these employers; and the earnings threshold and minimum contribution rates.

MPs said they had concerns about the knowledge and resources small and micro employers had in order to implement auto-enrolment.

Heidi Allen, committee member, said: "As a business owner myself, I know how intimidating auto-enrolment can potentially be for the smaller employer. While I'm very supportive of encouraging people to save for retirement and the concept of automatic enrolment, I am concerned that some small employers may not have the knowledge or resources to implement the policy."

Under the programme, every employer in the UK must put certain staff, unless they choose to opt out, into a pension scheme and contribute towards it. 

Larger businesses are already required to auto-enroll staff. The requirement is now gradually being applied to smaller employers.

Frank Field, chair of the committee, said: "Time has now come for smaller employers, including people who would not consider themselves business people - such as those who employ nannies and carers - to participate. 

"We must ensure they are in a position to cope with these new obligations. We will also look at contribution rates and criteria for inclusion in auto-enrolment, to ensure that the right people are defaulted into saving adequately for retirement."

Nathan Long, head of corporate pension research at Hargreaves Lansdown, said the administrative burden needed to be reduced to ease the process.

"Small and micro employers undoubtedly hold the key to the successful roll out of automatic enrolment," he said.

"No longer are well-resourced HR teams in charge of implementation, it is now small business owners who must get to grips with the details of the legislation. If the admin burden is reduced for these small businesses on the back of the inquiry, it will have been a great success."

The inquiry will also look at the interaction between automatic enrolment and other pensions reforms, including the new state pension and pension freedom.

Long said: "It is interesting the committee will also examine the interaction between auto-enrolment and other pension reforms. Pension freedom in particular requires people to make confident, considered decisions at the point of retirement. This is in stark contrast to the inertia relied upon to make auto-enrolment a success."

The deadline for submission is 3 February 2016.

This article appeared in our December 2015 issue of The Actuary.
Click here to view this issue
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Topics:
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