NAO automatic enrolment progress report

09 November 2015

A report from the National Audit Office finds that over the last 3 years since the introduction of automatic enrolment, opt-out rates have been between 8% and 14%, much lower than expected.

Head of the National Audit Office (NAO), Amyas Morse said:

“The Department for Work and Pensions, The Pensions Regulator and The National Employment Savings Trust have worked closely together to introduce the automatic enrolment programme. They all have a clear understanding of their roles and the programme has so far delivered value for money. And more people are now saving for retirement. 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.”

The report commends the DWP for successfully introducing automatic enrolment to workplace pensions for large and medium-sized employers, (who account for around 20 million workers) but says that here are, however, significant risks ahead, as 1.8 million smaller employers are required to enrol their workers by 2018.

The report finds that 58,000 employers have enrolled 5.4 million workers between October 2012 and August 2015. Smaller employers are expected to have different requirements and responses to automatic enrolment. Greater operational challenges will also be created as the number of smaller employers increases. While most eligible workers work for larger employers and have already enrolled, the vast majority of employers still have to start automatic enrolment.

According to the NAO, the longer-term success of automatic enrolment will depend on its ability to stimulate higher retirement incomes and the DWP will need to monitor the way the programme interacts with wider pension and welfare reforms. The report details that the DWP should assess the impact of wider pensions policies, including pensions flexibilities, on automatic enrolment and monitor emerging trends and concerns, paying particular attention to the responses of employers and scheme trustees.

Read the full report: Automatic enrolment to workplace pensions.