Preparing for an auto-enrolment capacity crunch.

Ros Altmann new

The Telegraph is running a story suggesting that the DWP are drawing up a plan B for auto-enrolment that could see the timeline for initial staging stretch to the next decade.

Nannies, gardeners and staff at small firms may not get workplace savings schemes until 2020

Currently, all employers can expect a staging  date by the end of 2018, so this would represent a material change not just to the timetable, but to the pension prospects of those whose employer’s staging was deferred.

 

What do we mean by a capacity crunch?

On the plus side, such preparation is prudent. At a seminar given by the Pension Regulator late last week, I and the audience was told that there has been a further re-cast of the numbers of employers staging; the Government now estimates that in one quarter alone late in the enrolment cycle over 350,000 employers will stage. These numbers are frightening and the phrase “capacity crunch” is not alarmist. To manage around 120,000 employers in a month is logistically equivalent to managing all the employers which have staged so far (c60,000) twice in a month!

Just look at the original staging numbers

auto-enrolment traffic jam

and compare them with the revised projections of the Pension Regulator, issued earlier this year (after the total numbers staging was revised upward from 1,200,000 to 1,800,000.

staging graph

the purple lines represent the revised spikes in staging

The capacity crunch could come at any of the spikes but particularly the periods around the end of 2017.

staging profile

To understand what a peak of 350,00 in a quarter would look like, you need to extend the biggest spike here by a third again!

It is right for the DWP to be making contingency plans – this represents an unprecedented  call on private pension and payroll provision.


 

Unfortunate timing.

But I have issues with the timing of what appears to be a DWP leak. The DWP are putting the delivery of auto-enrolment largely  in the hands of the private sector, a sector that is disgruntled at being handed what it considers a “hospital pass”. If the DWP had attended the 20:20 innovation seminars, where accountants have been able to speak freely among themselves, they’d have heard this spoken plainly.

Suggesting that were we to have mass non-compliance, auto-enrolment would be deferred or even pulled, is to offer an amber light to those who advocate cicil disobedience, namely employers who ignore or deliberately flout the law.

Clearly I speak with the vested interest that I have put myself on the side of legal compliance and that I run a business that helps employers stage auto-enrolment successfully – I would say that wouldn’t I?

But since when has helping employer to do the right thing by their staff and comply with the law been considered a bad thing?


 

Demoralising?

Clearly there is concern that the Telegraph story could do much to disincentivise employers and demoralise those providing them with support.

Steve Webb, who did more than anyone to make auto-enrolment a success tweeted yesterday

And of course, the cynics were quick to pick up that the Telegraph’s message flatly contradicted the Government’s current advertising campaign to raise awareness of the workplace pension

 

To the likes of John Ralfe, the Telegraph story is a saboteur’s charter.

Oneof my freinds (not prone to conspiracy theories)  mailed me for my views on the matter

Seemed alarmist but  big enough to prompt Steve Webb to tweet. Is this the deal with CBI to get support 4 Living Wage?

My view is that if there is pressure on Government, it is ballot-box pressure. The CBI do not represent nannies, gardeners and those who run small businesses, but their employers are the kind of people who vote, and can become disgruntled voters.

It’s no secret that pension policy is a football which those in power kick around to suit their  purposes. Football matches get postponed (for political reasons) and so can pension programs.

A group of 40 right wing politicians (in marginal seats) set out in 2012 a manifesto of 40 “red-tape” reforms they wanted in the Tory manifesto for 2015. They included the abandonment of auto-enrolment for small employers (starting now!). The demand was designed to make them electable. The demand was quietly dropped when it became clear that auto-enrolment had become a public policy success story , but ti could be revived at any time populist sentiment swung against “Workie”.


 

Giving the DWP the benefit of the doubt.

I don’t think it will come to that, I see what the payroll industry is doing to help people to compliance, I see them taking pension choice seriously and I hear accountants talking responsibly about how they will approach auto-enrolment. But what I see is the proportion of the staging population (and their agents) who are engaged.

What I don’t see – but the DWP (through tPR enforcement and HMRC RTI numbers) sees the level of non-compliance.

I don’t see the DWP panicking. I have often said on this blog that in Ros Altman and Charlotte Clark, the DWP has a sensible and level headed team leading auto-enrolment policy. In Lesley Titcomb and  Charles Counsell, they have two first class regulators. If there is a threat, it is not from within the DWP but from without, from those who see no value in auto-enrolment – only the short-term loss of votes.

It was ever thus, the short-term interests of getting elected against the long-term interests of the country in getting retirement saving right.

Why this matters.

Politicians may regard pensions as a football but pensioners don’t. If your sole means of income is your state pension and what you’ve saved in workplace pensions, you consider your saving vital to your current and future well-being. Sadly, too few of us in work can imagine what it is like not to be able to work due to infirmity and cognitive impairment. We see retirement as something that’s either going to happen by right or – if we’re heartless – we adopt a “work till you drop” mentality. Think Boxer in Animal Farm.

Boxer

If you are a nanny, gardener or you work for a small employer, how do you feel about missing out on eight years of employer contributions and having no workplace pension till eight year after your colleagues at Marks &Spencer and RBS got theirs?

Eight years is 20% of a working lifetime, and the contributions you haven’t made in the first eight years of your career are worth three times as much to you at retirement as those you make in your last eight years (the power of compounding interest).

The point of staging auto-enrolment is that the people who have no workplace pensions have already been waiting too long. They are the ones who are excluded from the benefits of a good savings plan, an employer contribution and the soft compulsion of auto-enrolment.


 

Those, like Ralfe,  who scoff at “Workie’ and the auto-enrolment project, scoff at the people without a workplace pension.

But I see very few of the scoffers who are without good pension provision themselves.

yeats

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Preparing for an auto-enrolment capacity crunch.

  1. Gerry Flynn says:

    The comment by Alan Higham is the first time I have heard anyone refer to AE as a voluntary replacement for SERPS/2SP!

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