Nest questions if industry can cope with 2016 AE staging

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The National Employment Savings Trust has called into question how the industry will cope with the number of employers due to stage into the auto-enrolment system in 2016.

Speaking to FTAdviser, the organisation’s executive director of product and marketing Gavin Perera Betts said that innovation, particularly technology, will be key to helping employers reaching their staging dates.

“Our research shows 84 per cent of small and micro employers yet to stage don’t have an active pension scheme in place. Many may not have thought about pensions before.”

He argued that simply expecting 1.8 million small employers to become pension experts overnight seems impractical.

“Instead, it would be easier for the industry to see auto enrolment through their eyes. That means developing tools that make compliance easier and volumes staging more manageable.”

Mr Betts explained that 2016 will see Nest’s web services payroll integration tool available through more payroll providers. “With this, payroll software can pick up and crunch all the data needed for auto-enrolment and send it across to Nest automatically.

He went on to say that this means that although smaller employers might have little experience with pensions, there are very few employers that can avoid having to deal with payroll in some shape or form.

Mr Betts added that some employers may decide they do not want to manage auto-enrolment in-house, even with innovations in payroll integration, so many will decide to outsource the process.

In mid-December, the Work and Pensions Committee launched an inquiry into automatic enrolment, asking for written evidence on the implementation of the legislation so far, especially the effects on small and micro employers.

The review will also look at the suitability of the auto-enrolment earnings threshold and minimum contribution rates, along with analysis of delays to the implementation of increases to minimum contributions that were announced in the Autumn Statement.

In November, Department for Work and Pensions permanent secretary Robert Devereux was grilled about opt-out rates for auto-enrolment before parliament’s Public Accounts Committee.

The department has revised the headline estimated opt-out rate to 2018 from 28 per cent to 15 per cent, given lower than anticipated opt-outs so far.

But its estimated opt-out rate for when contributions reach 8 per cent would also be 28 per cent, prompting questions about whether large numbers of people would leave with a small pot.