MPs have launched a probe into the implementation of auto-enrolment that will look at the policy’s interaction with state pension reform, contribution thresholds and its impact on smaller employers.
The DWP Select Committee will look at the interaction between automatic-enrolment and other pensions reforms, ‘including the new state pension and pension freedom’.
To date the DWP has published no detailed analysis of the combined impact of the significant changes to the pension system currently being implemented, despite fears that a significant proportion of the auto-enrolment target market may face lower incomes in retirement once these reforms are embedded.
The committee will examine the Department’s support for small and micro employers in meeting their automatic enrolment obligations, and will consider recommendations for improvement of the suitability of the auto-enrolment earnings threshold and minimum contribution rates.
It will also look at the effect of the delays to the implementation of increases to minimum contributions announced in the Autumn Statement.
Committee member Heidi Allen MP says: “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. It is vital we communicate to and support these smaller employers so they can meet the new requirements. I hope this inquiry will help us to review the effectiveness of the current process and make recommendations for improvement.”
Chair of the committee Frank Field says: “Automatic enrolment is generally perceived as being successful to date, but in the early stages of delivery it was only large and medium sized employers that had to meet these new pension requirements. 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.”
Aviva managing director of business solutions Andy Beswick says: “It’s sensible that there is going to be a review of how auto-enrolment is going to impact very small companies. All employers will have to set up a workplace pension scheme for their employees and it’s important that the process is well thought through to make it as smooth as possible.
“Planning is key here. SMEs of all sizes should be looking now to find out when their staging date is so they can begin to prepare.”
