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27 Jan 2016

MPs raise concerns over how smaller firms will cope with pension auto-enrolment

Concerns have been raised by an MP committee over the potential burden small firms could face by placing staff in workplace pensions, AOL Money reports.

The scheme was introduced in 2012 amid fears of an impending old age savings crisis. Since it began, 5.4 million have been automatically enrolled into the scheme by 58,000 employers. Fewer people have opted out of the scheme than expected.

However, these figures represent larger firms and the Commons Public Accounts Committee believe the “real test” for the scheme will begin when 1.8 million smaller companies have to enrol their workforce.

The MPs warn that as smaller firms have “fewer resources” to handle the change, the Department for Work and Pensions (DWP), the Pensions Regulator and the National Employment Savings Trust (Nest) will face a harder task in supporting them.

The report said: “We are concerned about the potential burden on small employers. Smaller employers have fewer resources to administer automatic enrolment and simplifying the process will be critical to the success of the programme.”

“Auto-enrolment is entering a critical stage which will affect 1.8 million additional employers and their staff. It is vital people can understand, implement and have faith in the system,” said committee chairwoman, Meg Hillier.

The MPs also called for clarification from the Government on the treatment of smaller pension pots, created when people change employers.

Further concerns were raised over the lack of access the Pensions Regulator has to “real-time information”. The committee believes this would help with the introduction of the scheme to smaller companies.

The cross-party committee highlighted that the DWP still needs to resolve important questions which may affect the value of workplace pensions.

They warned: “There is a risk that people will be disappointed with their pension if they continue to pay minimum contribution rates.”

One of the committee´s recommendations was for the DWP to simplify the online tools which were created to help companies.

Copyright © M2 Bespoke 2016

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