bull From the Permanent Secretary
Department Sir Robert Devereux Caxton Housefor Workamp
Pensions T othill Street LONDON
SW1H 9DA
Meg Hillier MP House of Commons London SW1AOAA
25 January 2017
Automatic Enrolment to Workplace Pensions
In line with your report I am writing to provide you with an update on recommendations 1 4 and 6 of the Eighteenth Report of Session 2015-2016 on Automatic Enrolment to Workplace Pensions
The recommendations required the Department to report back to the Committee in 12 months setting out progress in implementing automatic enrolment for smaller employers the scope and progress of its planned review of automatic enrolment and updating the Committee on when the National Employment Savings Trust (NEST) will repay its loan
Implementing automatic enrolment for smaller employers
I am pleased to report that the roll-out of automatic enrolment continues smoothly Latest figures from The Pensions Regulator (10 January 2017) show that over 71 million employees have now been enrolled and more than 370000 employers have declared their compliance For those employers who have staged compliance levels remain high and continue to track above the programmes initial estimates
The Department and the Regulator remain committed to ensuring that small and micro employers are aware of their automatic enrolment duties and can meet these in a straightforward way Together with The Regulator DWP launched a refreshed multi-channel communications campaign in October 2015 which focussed on raising awareness of automatic enrolment among small and micro employers The Regulator has simplified the language and terminology used in their communications to explain clearly what an employer needs to do by when and to signpost to relevant guidance with an online step by step guide This step by step guide is designed to meet the specific needs of employers who may not have pensions experience including those with just one or two staff The guide includes a duties checker so that employers can easily find out what they will need to do to comply Using the duties checker also means employers will receive tailored communications relevant to their circumstances
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The Regulator published its Employer Survey Tracker Report which tracks employers awareness understanding knowledge attitudes actions and intended action in relation to automatic enrolment in July 2016 Key findings included that there continued to be high levels of awareness among small (95) and micro (79) employers due to reach their staging dates in 2016 and 2017 Levels of understanding of automatic enrolment (as measured by the research) among employers due to reach their staging in 2016 and 2017 increased from 68 in autumn 2015 to 81 in spring 2016 Also between one and two months from staging understanding levels among small employers to date stands at 82 while among micro employers it stands at 88 These are similar levels to levels among medium and large employers 88 and 92 respectively
To help smooth rollout to smaller employers the Committee also recommended that the Regulator develop a fully functioning Real Time Information (RTI) feed from HMRC by July 2016 and ensure it has stepped up its active policing of compliance This recommendation has been implemented The Pensions Regulator started receiving a fully functioning monthly data feed of RTI from HMRC in July 2016 Over the last 9 months the Regulator has increased its focus on checking the validity of employer compliance RTI data enables the application of an enhanced risk assessment approach to ensure greater operational efficiency and to mitigate against the burden of challenging employers who have in fact correctly complied
As noted in our last response further updates on the progress of automatic enrolment were published in The Regulators Blue Book in July 2016 and the Automatic Enrolment Evaluation Report 2016 in December 2016 which can be found at
httpwww thepensionsregulator gov ukdocsautomatic-enrolment-commentaryshy9nEl~sis-2016pdf
IJtp_swwwgov ~overnmentugloadssystemuploadsattachment datafile57622 7automatic-enrolment-evaluation-report-2016pdf
The Department continues to monitor closely the experience of small and micro employers and to work with delivery partners to determine what additional support may be needed The review of automatic enrolment policy in 2017 will also be an opportunity to consider whether its technical operation is working as intended In doing this the review will consider whether there may be any policies which disproportionately affect different categories of employers or could be further simplified
Scope and progress of the review of automatic enrolment
On 12 December 2016 the Minister for Pensions confirmed via a Written Statement (attached) the scope of the review of automatic enrolment that will be conducted in 2017
The main focus of the review will be to ensure that automatic enrolment continues to meet the needs of individual savers In doing this it will look at three broad themes the existing coverage of the policy to consider the needs of those not currently benefiting from automatic enrolment engagement and how this can be improved so
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that savers have a stronger sense of personal ownership and are better enabled to maximise savings and building an evidence base to support future considerations on contribution rates
In addition the review will include the requirements set in legislation relating to the statutory review of the alternative quality requirements for defined benefits schemes (section 23A of the Pensions Act 2008) and for the certification requirements for money purchase schemes (section 28 of Pensions Act 2008)
An examination of the level of the charge cap which was intended to take place in 2017 will also be incorporated within this review This will assess whether the level of the cap should be changed and whether some or all transaction costs should be covered by the cap
In the early part of 2017 DWP will be engaging with stakeholders from across industry on these issues Towards the end of 2017 the Department will publish a report setting out its policy recommendations
The automatic enrolment review work will be led by a DWP team and supported by an external advisory group This group which will be chaired by and made up of experts from within the pensions industry and those representing member interests and employers will provide insight and a challenge function to help shape proposals Membership and the Terms of Reference for this group will be announced shortly
The NEST Loan
NEST continues to grow rapidly it currently has over four million scheme members and over pound13 billion in assets under management At 31 March 2016 the loan from the Department to NEST Corporation stood at pound460 million Whilst there remain significant uncertainties about the path of NESTs future finances the next set of financial projections will not be available until the end of March 2017 In order to avoid providing the Committee with out of date data the Department intends to provide the Committee with some additional information about the likely break-even point and repayment timescales of the loan in April 2017
I hope you find this information useful
Sir Robert Devereux Permanent Secretary for the Department for Work and Pensions
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The Regulator published its Employer Survey Tracker Report which tracks employers awareness understanding knowledge attitudes actions and intended action in relation to automatic enrolment in July 2016 Key findings included that there continued to be high levels of awareness among small (95) and micro (79) employers due to reach their staging dates in 2016 and 2017 Levels of understanding of automatic enrolment (as measured by the research) among employers due to reach their staging in 2016 and 2017 increased from 68 in autumn 2015 to 81 in spring 2016 Also between one and two months from staging understanding levels among small employers to date stands at 82 while among micro employers it stands at 88 These are similar levels to levels among medium and large employers 88 and 92 respectively
To help smooth rollout to smaller employers the Committee also recommended that the Regulator develop a fully functioning Real Time Information (RTI) feed from HMRC by July 2016 and ensure it has stepped up its active policing of compliance This recommendation has been implemented The Pensions Regulator started receiving a fully functioning monthly data feed of RTI from HMRC in July 2016 Over the last 9 months the Regulator has increased its focus on checking the validity of employer compliance RTI data enables the application of an enhanced risk assessment approach to ensure greater operational efficiency and to mitigate against the burden of challenging employers who have in fact correctly complied
As noted in our last response further updates on the progress of automatic enrolment were published in The Regulators Blue Book in July 2016 and the Automatic Enrolment Evaluation Report 2016 in December 2016 which can be found at
httpwww thepensionsregulator gov ukdocsautomatic-enrolment-commentaryshy9nEl~sis-2016pdf
IJtp_swwwgov ~overnmentugloadssystemuploadsattachment datafile57622 7automatic-enrolment-evaluation-report-2016pdf
The Department continues to monitor closely the experience of small and micro employers and to work with delivery partners to determine what additional support may be needed The review of automatic enrolment policy in 2017 will also be an opportunity to consider whether its technical operation is working as intended In doing this the review will consider whether there may be any policies which disproportionately affect different categories of employers or could be further simplified
Scope and progress of the review of automatic enrolment
On 12 December 2016 the Minister for Pensions confirmed via a Written Statement (attached) the scope of the review of automatic enrolment that will be conducted in 2017
The main focus of the review will be to ensure that automatic enrolment continues to meet the needs of individual savers In doing this it will look at three broad themes the existing coverage of the policy to consider the needs of those not currently benefiting from automatic enrolment engagement and how this can be improved so
Page 2 of 3
that savers have a stronger sense of personal ownership and are better enabled to maximise savings and building an evidence base to support future considerations on contribution rates
In addition the review will include the requirements set in legislation relating to the statutory review of the alternative quality requirements for defined benefits schemes (section 23A of the Pensions Act 2008) and for the certification requirements for money purchase schemes (section 28 of Pensions Act 2008)
An examination of the level of the charge cap which was intended to take place in 2017 will also be incorporated within this review This will assess whether the level of the cap should be changed and whether some or all transaction costs should be covered by the cap
In the early part of 2017 DWP will be engaging with stakeholders from across industry on these issues Towards the end of 2017 the Department will publish a report setting out its policy recommendations
The automatic enrolment review work will be led by a DWP team and supported by an external advisory group This group which will be chaired by and made up of experts from within the pensions industry and those representing member interests and employers will provide insight and a challenge function to help shape proposals Membership and the Terms of Reference for this group will be announced shortly
The NEST Loan
NEST continues to grow rapidly it currently has over four million scheme members and over pound13 billion in assets under management At 31 March 2016 the loan from the Department to NEST Corporation stood at pound460 million Whilst there remain significant uncertainties about the path of NESTs future finances the next set of financial projections will not be available until the end of March 2017 In order to avoid providing the Committee with out of date data the Department intends to provide the Committee with some additional information about the likely break-even point and repayment timescales of the loan in April 2017
I hope you find this information useful
Sir Robert Devereux Permanent Secretary for the Department for Work and Pensions
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that savers have a stronger sense of personal ownership and are better enabled to maximise savings and building an evidence base to support future considerations on contribution rates
In addition the review will include the requirements set in legislation relating to the statutory review of the alternative quality requirements for defined benefits schemes (section 23A of the Pensions Act 2008) and for the certification requirements for money purchase schemes (section 28 of Pensions Act 2008)
An examination of the level of the charge cap which was intended to take place in 2017 will also be incorporated within this review This will assess whether the level of the cap should be changed and whether some or all transaction costs should be covered by the cap
In the early part of 2017 DWP will be engaging with stakeholders from across industry on these issues Towards the end of 2017 the Department will publish a report setting out its policy recommendations
The automatic enrolment review work will be led by a DWP team and supported by an external advisory group This group which will be chaired by and made up of experts from within the pensions industry and those representing member interests and employers will provide insight and a challenge function to help shape proposals Membership and the Terms of Reference for this group will be announced shortly
The NEST Loan
NEST continues to grow rapidly it currently has over four million scheme members and over pound13 billion in assets under management At 31 March 2016 the loan from the Department to NEST Corporation stood at pound460 million Whilst there remain significant uncertainties about the path of NESTs future finances the next set of financial projections will not be available until the end of March 2017 In order to avoid providing the Committee with out of date data the Department intends to provide the Committee with some additional information about the likely break-even point and repayment timescales of the loan in April 2017
I hope you find this information useful
Sir Robert Devereux Permanent Secretary for the Department for Work and Pensions
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