“Fair and True” applies to the DWP too!



A conversation earlier this week has been gong round my head these past few days. The exact words are gone but the import was this

“the financial services industry claim everything is “free”, the public know otherwise, they know you lie when you say that”

I have already written once this week about the need for us to be clearer about the true costs of setting up company pensions (on boarding). But though these numbers are clear, are they true?


The source for this information is the Pension Regulator and the Department of Work and Pensions. The number of firms and their size rely on the small and medium size enterprise statistics; 2007. How the DWP estimated the staging budgets is not clear.

The financial services industry may have a bad name for being “fair and true” but the DWP must accept it is not covering itself in glory by stating that the cost of staging is on average £100.

If the on-boarding cost at the provider end are taken to be £60 x30 (hours) = £1800 (plus potentially non recoverable vat), I’d argue that the VAT itself will dwarf the DWP’s total estimates.

And that’s before we look at the compliance costs (initial and ongoing) on the employer side.

This is public mis-selling on a grand scale. Whether this results from a failure to understand the cost-implications of implementing auto-enrolment or whether there was a deliberate downplaying of these costs to get the bill through parliament, these numbers are wrong and wrong by a factor of at least twenty.

For all the cheery faces of the “I’m in” campaign, a dose of realism is needed from Government along the lines of

“Government apologizes for suggesting that implementing Auto-enrolment will be a breeze”

Because for every pronouncement from the providers that they need employers to act early , project plan and be AE ready, there are a bunch of key influencers in television, the national papers and the key financial websites who will argue that this is just the financial services industry scaremongering.

Embarrassing as it is to NEST, a Government agency, to whistle-blow on their bank-rollers but it is time that Tim Jones pointed out to Steve Webb and to his 1.2m portential customers that getting NEST inside your business is going to cost money and time (which are of course equivalent).

This kind of disclosure may not have been politically possible when AE was a twinkle in the DWP’s eye, but times have moved on. Steve Webb has a public policy success on his hands but if he’s to capitalise on the good news from large employers, he’s going to take a few bullets now.

Simply beating up providers (with a charging cap) and advisers (by taking away the consultancy charge) is not enough. The DWP need to be clear that the original estimates in the table above which appeared in a number of DWP documents, under-cooked the costs.

So long as those figures are out there, employers can rightly suggest to the DWP that £100 of their time is not more than a couple of hours and that’s an awful lot shorter than the time between now and staging (for most of them).

So let’s get some revised numbers from the DWP so that employers can insert them into their forecasts, providers can work in an environment where the threat of these costs reverting to their balance sheers recedes and where those advisers keen to help AE work, know there is a chance they might get paid.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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8 Responses to “Fair and True” applies to the DWP too!

  1. Ian Davidson says:

    Good blog post. In the private sector we know that “we get what we pay for” and judging from the DWP numbers there are a lot of monkeys around. I remember a few years ago undertaking a cost benefit analysis for my organisation on a government regulation and found the cost to my organisation over a five year period was greater than the total estimated cost by the government department. I guess in the current climate it is OK to pass costs on to employers; but they should at least be honest about it…..

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  3. Dion Prideaux-Reynolds says:

    Excellent blog. Unfortunately politicians and civil servants rarely present the truth in order to push through policy or simply don’t actually live in the real world. To some extent it is like Steve Webb stating that employers do not need advice on AE. The other cost to note is the one for early members of NEST. Why should scheme members be paying back a loan from the Government through a 1.8% contribution charge, particularly those who are closer to retirement where the total annual charge is higher?

  4. Kate Upcraft says:

    Couldn’t agree more Henry and remember that employers have had a double whammy, HMRC published a fairy tale impact assessment that RTI would save employers £300m! It’s more likely to have cost the payroll software industry alone that much, goodness knows how much it has then cost individual employers to implement it. These costings are pointless, all government departments do is find out the cost from their IT suppliers and than manufacture savings to ensure the Minister can sign on the dotted line to say overall it’s a great idea. In the RTUI Customer User Group of which I am a member we have constantly asked for the Impact assessment to be revisited, needless to say HMRC won’t budge; hope you have better luck with DWP!

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