NAO identifies significant risks for auto-enrolment

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NAO identifies significant risks for auto-enrolment

There are significant risks ahead for the roll-out of automatic enrolment, as 1.8 million smaller employers are required to stage their schemes by 2018, according to a new report from the National Audit Office.

While the Department for Work and Pensions wa praised for the successful introduction of the legislation for large and medium-sized employers, which account for around 20m workers, the government faces “significant challenges” in ensuring that people have adequate incomes in retirement.

The NAO found that 58,000 employers have enrolled 5.4m workers between October 2012 and August 2015, but from now on the smaller employers will have different requirements and responses to auto-enrolment.

Amyas Morse, head of the NAO, stated the DWP, The Pensions Regulator and The National Employment Savings Trust have worked closely together to introduce the programme, so far delivering value for money.

Opt-out rates have also been between 8 and 14 per cent; much lower than expected.

“But significant risks remain; the volume of smaller employers will impose significant pressures and DWP will need to ensure that more widespread enrolment translates into higher retirement incomes,” he added.

Programme spending is on track at £554m to the end of March 2015, which is around half of total budgeted costs.

The DWP estimates that employers will spend £500m setting up auto-enrolment and £140m each year on administering it.

The NAO added that the longer-term success of the programme will depend on its ability to stimulate higher retirement incomes, while the DWP will also need to monitor the way the programme interacts with wider pension and welfare reforms.

Frank Field MP, chair of the Work and Pensions Committee, commented that the next phase of the policy is an important area and one his committee will focus on in its upcoming inquiry.

“Small and micro employers face very different challenges to the larger employers that have already enrolled. We will consider whether enough has been done to support smaller employers with their obligations, anticipate potential challenges for these employers and make recommendations for improvement of the process.”

The committee is set to announce details of its own inquiry into auto-enrolment for smaller businesses shortly.

The NAO report comes after yesterday six people were arrested relating to an automatic enrolment scam.

Arrests were part of a joint operation involving Derbyshire and Nottinghamshire police, The Pensions Regulator and the Employment Agency Standards Inspectorate.