The coalition government has refused to rule out further delays to the proposed national workplace pension scheme after launching a three-month review to determine how it should work in practice.
Under current plans, the National Employment Savings Trust (NEST), which requires all employers to either enrol their staff in a company pension or pay a minimum 3% contribution into the NEST pot, is due to launch next year. But the scheme’s introduction will be phased in and full auto-enrolment is not scheduled to be fully up-and-running until 2017. Some experts have claimed that it will add between 20-40% to existing payroll costs.
But Pensions Secretary Iain Duncan-Smith and Pensions Minister Steve Webb have now enlisted three pensions afficionados to review the scheme and report back at the end of September.
The experts comprise Paul Johnson, an economist with the Institute of Fiscal Studies, David Yeandle, head of employment policy at manufacturers’ association the EEF, and Adrian Boulding, pensions strategy director at Legal & General. Consumer groups have criticised the lack of either union or consumer representation on the panel.
But while Webb said the government was committed to the auto-enrolment concept, he also told MoneyMarketing that: “In the previous government’s signing of the contract for the administration of Nest, there was a break built in available to us in the autumn”.
He added: “We regard getting people into workplace pensions schemes as something we want to get on with. We do not want to bring further delay, which is why the review is three months. But we want to make auto-enrolment work. If Nest is the best way to do it, that is what will happen. If the review team comes back and says we should change it, we will change it.”
The review will explore whether the earnings threshold above which automatic enrolment applies is the right one and whether there should be a minimal contribution level before automatic enrolment kicks in. It will also evaluate the age group that automatic enrolment should cover, the size of firm it should apply to and whether employees should be automatically enrolled from day one of employment or at a later date.
Tim Jones, chief executive of the Personal Accounts Delivery Authority (Pada), which has been charged with delivery the scheme, told Citywire that work on developing the scheme would not be put on hold during the review, however.
“We will continue to get on with our work to build Nest, to ensure all options continue to be available to the government at the conclusion of the review,” he added.
The findings of the review are expected to be presented to ministers only weeks before Pada is due to sign a £600 million contract with offshore outsourcing company Tata Consultancy Services.
The news came as unions accused the coalition government of making people “work until they drop” following their latest plans to up the state pension age for men to 66 from 65 as of 2016 – nearly a decade earlier than the last government was planning.
The coalition also proposes increasing the age under which people will be able to claim their state pension to 70 or more over time. The former government intended to increase it to 68 by 2046.
