Automatic enrolment has reached a new landmark, but the path from 2017 onwards could be challenging
When automatic enrolment (AE) into workplace pensions started in October 2012, there were some doubts about how successful it would be. A little over four years later, few doubters remain.
The latest data from The Pensions Regulator (TPR) shows that more than seven million workers are now a member of a pension scheme encompassing more than 340,000 employers. The earliest were the largest employers but now it’s the turn of small and micro employers (sub-30 employees).
Such is the skew towards small employer sizes in the UK that over 700,000 employers will need to start their workplace pension in 2017. There are already signs that compliance among smaller employers is becoming an issue:
- In the third quarter of 2016 TPR issued over 15,000 compliance notices, against the 11,000 it had issued in total over the previous 15 quarters.
- It also imposed three and a half times more of the most serious penalties − escalating penalty notices of up to £10,000 a day – over the same period.
In 2017 the Department for Work and Pensions will undertake a review of the AE process, which could eventually see new measures to extending to the self-employed and those with multiple low-paid jobs. The review will not explicitly propose increased levels of contributions, although most pension experts think that the current ceiling of 8%, due to be reached in April 2019, is too low. At present the total contribution is just 2%, split equally between employer and employee, which may explain why few people have opted out. Next year, when employees’ contributions treble and employers’ double, could see a reaction against AE.
AE is a step on the road to adequate pension provision, but on its own will not be adequate for many people, particularly those who have only a limited time remaining in which to contribute.
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