Public Accounts Committee expresses concerns over SME auto-enrolment

15th February 2016

The Public Accounts Committee has expressed a number of concerns in its report published 27th January 2016 over Automatic Enrolment to workplace pensions, and has concluded with a number of recommendations and a request for an update from the DWP in 12 months time.

Apart from small businesses being aware of automatic enrolment, the PAC concluded that awareness was not the same as understanding, particularly when it came to making choices between pension providers and schemes.

A core concern was also access to accurate real-time information (RTI) feeds, which will only become available from the HMRC next summer. The Pensions Regulator (TPR) currently uses HMRC PAYE information to plan implementation dates and monitor employer compliance. Early indications suggest The Pensions Regulator has sufficient capacity to roll out automatic enrolment to smaller employers and monitor compliance effectively, but the PAC recommended that a fully functioning RTI feed from HMRC was in place by July 2016 at the latest.

The PAC was concerned about the potential burden on small and micro employers, where resources to administer automatic enrolment are limited. According to the report there was much talk about simplifying the process and how critical this would be to the success of the programme, and the use of online tools and software. However, hard pressed small businesses chasing income will be hard pressed to get to grips with both the advice and the processing side of auto enrolment. FMP has developed a one button approach to auto enrolment.

Of course there was a view that the success of automatic enrolment should be viewed in the context of wider reforms affecting the long term adequacy of retirement incomes, providing real-time information to HMRC and ensuring compliance with the national living wage. The committee again concluded that an update in 12 months time from the DWP before they undertake the formal review of automatic enrolment in 2017.

Questions were raised on how employees could calculate and understand the overall value of their future retirement income, and on how the DWP can restrict the charges that providers can levy. The committee concluded that the Department should ensure that scheme regulation, charge caps and disclosure requirements cover all relevant costs to customers and commit to ensuring that charges remain low by international benchmarks.