Govt considers 'emergency pause' for auto-enrolment

The report states:

“As a last resort [the Department] has set out an ‘emergency pause’ procedure to apply if the programme was unable to cope with unexpected increases in demand or changes in behaviour.”

Tom McPhail, Head of Retirement Policy at Hargreaves Lansdown, commented:

“This is an entirely sensible precaution. Without it, there would be the risk of severe reputational damage to the entire auto-enrolment programme. Effectively, NEST now stands alone as the sole pension provider for the best part of 2 million micro-employers; there is nowhere else they can turn to meet their statutory obligations without having to pay significant administration fees. If NEST’s systems were unable to cope, or even if they were subject to a cyber-attack, the auto-enrolment programme could swiftly descend into chaos.”

There are currently 1.8 million employers due to auto-enrol - an increase of 37% compared to the Pension Regulators estimate as recently as 2013.

So far the DWP has spent £34 million on communications and raising awareness. It plans to spend a further £60 million by 2018.

The audit office review also highlights the significant discrepancy between the £420 million NEST currently has under administration and the £20 billion it estimates it would have needed to meet its current operating costs in 2014/15. In the 12 months to 31 March 2015, Nest incurred costs of £98.7 million, against income of just £18.5 million. It currently has an outstanding loan of £387 million from the UK taxpayer.

Tom McPhail added:

“The creation of NEST was always as essential element of the auto-enrolment programme. The taxpayer has had to dig deep to finance this project and the repayment of this debt continues to be dependent on NEST achieving significant growth in the future.”