The Public Accounts Committee (PAC) has raised concern about the burden on small businesses as the automatic enrolment programme picks up pace.
So far 58,000 employers have put 5.4 million people into workplace pensions as a result of AE, but the committee of MPs said the real test for the initiative was starting as 1.8 million small firms enrol their staff.
Committee chairwoman Meg Hillier said: “Auto enrolment is entering a critical stage which will affect 1.8 million additional employers and their staff. It is vital people can understand, implement and have faith in the system.”
In the report MPs warned smaller employers have fewer resources to cope with the change than larger companies and simplifying the process will be critical to the success of the programme.
The committee added that The Pensions Regulator (TPR) did not have access to real time information that would help smooth the roll-out of the scheme to small firms.
MPs recommended that the DWP keep a close eye on the way the initiative was working and consider ways to simplify online tools developed to help businesses.
The committee also called on the government to clarify how smaller pension pots created as people move between employers will be treated. The report added: “There is a risk that people will be disappointed with their pension if they continue to pay minimum contribution rates.”
The PAC also raised concern that the government set up pension scheme NEST did not know when it will repay the £387m loan used for its establishment.
However Will Sandbrook, NEST’s executive director of strategy, said its financial position was secure.
He told AccountingWEB: “We are confident, as is the DWP, that the loan will be repaid in full and NEST will be delivered at nil cost to the taxpayer.”
AccountingWEB has launched the No-one gets left behind campaign to alert as many accountants as possible to the obligations implied by auto enrolment. Read our simple eight-point statement which sets out the auto enrolment facts you need to know.