29 June 2010 – Publication of DWP research report 652: Consultation on workplace pension reforms: qualitative research with small and medium-sized companies

Research published today by the Department for Work and Pensions explores the views of employers with 500 employees or fewer on the proposed workplace pension reform regulations. The research consulted with 66 employers and looked at general attitudes toward the reforms and some of the more detailed aspects of the proposed regulations.

Key findings from the research were:

• Overall, there was a good level of awareness of the basic details of the reforms amongst employers, although this did not extend to NEST. In general, the larger the employer, the higher the awareness.

Areas supported / understood

• Generally, the implementation approach using staging was well received and smaller employers welcomed that larger employers would go through the process of auto-enrolment first. It was thought that this would delay administration and contribution costs and mean that possible teething problems would be ironed out first by the larger companies.
• The 12-month notification o  of the need to comply with the duties imposed by the reforms was mostly seen as acceptable, although some larger employers suggested that 18 months would be preferable, as they usually planned financially more than 12 months ahead.
• The 19-day rule around refunds is widely understood and accepted.

Areas less supported / thought to be ambiguous

• Aspects of the process of certification were found to be ambiguous and there was a desire for clarification so that employers could avoid making any unintentional mistakes that could be seen as non-compliance.
• Rules around inducement (in terms of what constitutes an inducement between an employer and employee) were thought to need greater clarity.
• Payment failure penalties and the non-compliance fixed penalty were mostly thought to be too lenient. There was also a desire to see penalties applied relative to the size of the company.

Impact of administration

• The administrative impact of the reforms on employers is likely to be driven by size of firm and current pension provision.
• It was difficult for employers to quantify cost and/or time resource impacts that the regulations will have. This was primarily because processing opt-outs and opt-ins was expected to require the greatest administrative effort, and the number of employees that would opt out was the greatest unknown.
• Employers were anticipating a significant administrative burden from employees choosing to repeatedly switch from opting in and opting out of pension provision. However, they were unaware that the ability to do this may be restricted, with employees only being allowed to opt in once a year.
• Other aspects around administration were not anticipated as being particularly burdensome.

Notes to Editors

• DWP Research Report No 652 – “Consultation on Workplace Pension Reforms: Qualitative research with small and medium-sized companies” is published today, 29th June, by DWP.
• The research was conducted on behalf of DWP by RS Consulting. The report authors are Andrew Wood, Marisa Robertson and Dominika Wintersgill.
• The report and summary are available free on the DWP website http://research.dwp.gov.uk/asd/asd5/rrs-index.asp
• The report consulted with 66 private sector businesses of up to 500 employees and consisted of 10 focus groups with 55 employers and 11 individual depth interviews with employers.

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