Auto enrolment schemes need reforming

New compulsory workplace pension schemes that will be used by millions of people are too complex and often give poor value money, the Office of Fair Trading (OFT) has said.

The trading watchdog, which examined the £275bn defined contribution pensions market, said it had agreed reforms with companies and The Pensions Regulator as the auto enrolment programme expands.

The defined contribution pension scheme will gradually see all workers aged between 22 and the state pension age who are not in a workplace pension signed up to one. Around five million people are saving into DC pension schemes. This is expected to increase by up to nine million savers over the next five years, after the government's introduction of AE last October.

The OFT's criticism, is the latest sign that the new workplace pensions will be a headache for payroll and finance departments. Experts have said that the pensions, which will be phased in from October, will be expensive for businesses to start and run and will require a lot of preparation.

The OFT report said...

Continued...

» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.

Comments

Pension entitlement and Child Benefit

mikefleming3028 | | Permalink

Any scheme that encourages people to take responsibility for their future has my vote but like everything the Government do they complicate or over engineer. Where there are huge sums of money to collect control and manage there will always be those working in the Financial Service’s sector that see it as an opportunity to line their own pockets, witness the mess we are all in because of the venal actions of the banks and other Financial Institutions. Auto Enrolment needs to be simple to understand, transparent in its application and ring fenced from Government intervention in the future. Only when Joe public regains confidence in the integrity of our financial institutions will this scheme be successful. Time will tell of course and the acid test will be the numbers of people who opt out either at the start or when times are hard.

Speaking of transparency we will all have seen HMRC`s current campaign to have those "couples" who are claiming Child Benefit one of which is earning £50K a year or more to give up their entitlement to the benefit. All right and proper you might think, either give up the benefit now or register for self-assessment and return it as part of SA and pay it back as part of the SA system. Lin Homer has herself penned the latest press release on the subject encouraging claimants to act before the deadline. So far so good or so you might think. However where one of the claimants is not in paid employment i.e. usually the mother if she gives up her entitlement not only does she loose the CHIB but she also loses out on pension credit and that fact is not mentioned anywhere in HMRC press releases or their on line help sheets that claimants are directed to use in the review process. In my humble view this is iniquitous in the extreme. There are two possibilities here, the first is that the exclusion of any reference to the loss of pension credit was a mistake or the second is that the non-mention was deliberate in which case heads should role.

I go back to my earlier comments on transparency and trust; I think we still have a long way to go before the public’s confidence is restored especially when it comes to financial matters and Government, any Government of any persuasion.