In an effort to study the effect of automatic enrolment in workplace pensions and the National Employment Savings Trust (NEST), the work and pensions committee has launched an inquiry.
The committee will gather evidence on the communication strategy of the Department for Work and Pensions, the effect of contribution cap, the changes in contribution cap and the ban on transfers.
“The changes will be introduced from October 2012 and will mean that every employer will be required to automatically enrol their workers into a qualifying pension scheme if they are not already enrolled in one auto-enrolment and to contribute to their pension,”, said a statement from the committee.
“This will include all workers who are at least 22, have not yet reached state pension age and earn more than the minimum earnings threshold – likely to be £7475 a year.
“A new pension scheme called NEST has been established by the government to provide a simple, low-cost pension scheme. NEST is open to all employers. Employers will also be able to use an existing pension scheme if it qualifies or its criteria are amended to meet the qualifying criteria; or set up a scheme, or use a combination of these options”, the statement added.
“Employers will be required to register with The Pensions Regulator, which will oversee the implementation of auto-enrolment”, the statement said. Deadline for written evidence is 28 August.
The review will also investigate products of other providers, NEST’s investment strategy, and the estimated rates for opting out of the scheme.
However, not everybody seems to support the move. “There are a lot of issues that still need to be determined”, said Carl Melvin, managing Director of Affluent Financial Planning.
“The government seems to be pushing forward regardless. It is a significant additional cost for a business. One has to wonder whether employers will choose not to employ more staff as a result of the burden”, he complained.