HC1494 Work & Pensions CommitteeLetter from Steve Webb MP, Minister of State for Pensions to the Committee Chair

I am writing to provide you with an update with regards to the introduction of automatic enrolment ahead of my appearance before the Committee in the New Year. We welcome the Committee’s interest in automatic enrolment and I will ensure that the Department continues to provide the Committee with relevant information as its inquiry unfolds.

The Government has confirmed its commitment to introducing automatic enrolment to tackle the challenges of increasing longevity and a rapid decline in retirement saving, and confirmed that automatic enrolment will begin as planned in autumn 2012 with employers for all sizes in scope.

In recognition of the fact that business—and smaller businesses in particular—are currently operating in very difficult economic conditions, we will soften the timetable for the implementation of automatic enrolment to give businesses some additional breathing space. Under the revised timeline, small business will be brought into the new automatic enrolment duties from May 2015.

I am aware of the need to provide certainty for employers who are already preparing for automatic enrolment. To provide this certainty, no employer with an existing “staging date” of on or before 1 July 2013 will be affected in any way; they will go ahead with implementation as planned.

We are currently working through what these changes mean for the detailed implementation of the reforms:

(i)It will take longer to bring all employers into the reforms than the previous plan of completing “staging in” by September 2016.

(ii)We are looking at how implementation might be smoothed to avoid peaks and lulls in activity. This may mean that some medium to large sized enterprises (ie those with staging dates after 1 July 2013) have a change in staging date.

(iii)Our previous plans were to keep the minimum employer contribution at 1% band earnings until October 2016, when it would rise to 2%, and then to 3% in October 2017. This will now be later, providing some easement for all employers of al sizes, not just smaller employers.

We intend to table a package of automatic enrolment regulations in January. This will cover all the remaining detail for automatic enrolment, except the implementation timetable.

We will also publish our detailed proposals for the new implementation schedule in January and seek Parliamentary approval before the summer.

1 December 2011