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NAPF warns Government changes to pensions auto-enrolment rules now will be 'highly damaging'

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The Government must not make a U-turn on its plans to start automatically enrolling all workers into a pension from next year, the National Association of Pension Funds (NAPF)has warned.

In a letter to chancellor of the exchequer George Osborne ahead of his Autumn Statement on 29 November, the NAPF expressed alarm at speculation that the Government may be considering exempting small businesses from the reforms, or that it might delay its implementation for some or all employers.

With 14 million people set to have an inadequate income in retirement, the NAPF urged the Government to stick with the existing reforms and timetable, which it said could help up to nine million people save for their old age.

It added that, under existing plans, auto-enrolment would anyway be gradually phased in to help ease the transition.

Speaking ahead of an NAPF conference today to help employers prepare for auto-enrolment, NAPF chief executive, Joanne Segars (pictured with pensions minister Steve Webb last month) said: “While carving out or pushing back the start date for small employers might have short-term political temptations in the current economic climate, the longer term effects would be highly damaging to the nation’s retirement prospects.

“When it comes to pensions, the Government must stick to Plan A. These reforms are a once-in-a-lifetime opportunity to help tackle the UK’s pensions saving crisis. These reforms have been a decade in the making and now is the time to press play, not pause.

“Small firms are essential to making these reforms work. Of the nine million expected to be enrolled, up to three and a half million are working for small businesses. Exempting them or delaying their start would put them at risk of a retirement spent in poverty.”

From next year, employers will be required to enrol people over 22 and earning a minimum of £7,475 per annum into a workplace pension. The Department for Work and Pensions (DWP) estimates this will get up to nine million people to saving into a pension for the first time, or get them saving more.

Last month, it emerged that the confidential Beecroft report commissioned by Downing Street recommended that auto-enrolment be delayed for small companies. As things stand, small employers will only be required to auto-enrol people into a pension from 2014 and pensions contributions will be phased in gradually to limit the impact on employers.

But addressing the NAPF Conference and exhibition in Manchester only weeks ago, pensions minister Steve Webb denied small employers would be exempt from auto-enrolment legislation.

According to the Department for Business, Innovation and Skills (BIS), small employers with between one and 49 members of staff employed 7,080,000 workers in the UK in 2010.