DWP faces “real test” over SME auto-enrolment
The Department for Work & Pensions has effectively implemented auto-enrolment for large firms, but will struggle to do the same for SMEs
THE PAC has expressed concerns over the DWP’s access to real time information when implementing auto-enrolment for small employers.
In its report, the committee raised fears that the DWP has yet to resolve questions that “affect the value of workplace pensions,” including limited access to RTI, a factor which could become a real burden for nearly two million small employers as they look to enrol their employees between now and 2018.
From January 2016, automatic enrolment will be extended to 1.8 million small employers. Minimum contribution rates are set to rise from 2% of qualifying earnings (currently) to 5% from April 2018, and then to 8% from April 2019.
Small employers will be looking to their accountants to help them with the whole process as many won’t have the time or the resources to enrol their employees by themselves.
“Smaller employers have fewer resources to administer automatic enrolment and simplifying the process will be critical to the success of the programme,” says the report.
“There is a risk that people will be disappointed with their pension if they continue to pay minimum contribution rates.”
The PAC went on to express fears over the National Employment Savings Trust (NEST) as to when it’s going to repay a £347m loan it took out to fund its establishment. The report calls on the department to write to the committee in 12 months, updating it on progress both in implementing auto-enrolment and against the committee’s recommendations.
Meg Hillier MP, chair of the PAC, said that auto-enrolment is entering a “crucial stage” for small businesses and that the DWP must be well equipped to support them.
“The Department for Work & Pensions must watch and learn from the experience of small employers and ensure easy-to-use tools are in place to support them. At the same time, swift action is required to ensure the Pensions Regulator can access accurate information.
“There must be greater clarity on outcomes for employees-for example, those with multiple small pension pots-and also over the substantial loan, funded by the taxpayer, which was used to set up NEST,” said Hillier. The MP added that her committee will be conducting its own review of the auto-enrolment programme, with a focus on how pension reforms could affect people’s income when they retire.