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‘Govt underestimating cost of enforcing NPSS’

Axa says the fact that the Government needs 16 enforcement teams to police the minimum wage shows it is underestimating the cost of monitoring the national pension savings scheme.

Head of pensions and savings policy Steve Folkard says he was alerted to the extent of the resources used to ensure that firms pay the minimum wage by a recent announcement from the Revenue. He says the Government may have to devote similar resources to ensure the NPSS is effectively policed, as many employers that abuse the scheme are likely to be those also flouting the minimum wage rules.

Earlier this year, Axa raised concerns that employers, particularly smaller firms under cost pressure, may attempt to avoid offering pensions to staff and discourage employees from auto-enrolling in the scheme.

The Government’s revelation in February that only one employer out of 70,000 which have broken the rules on stakeholder pensions has been prosecuted has further raised concerns over how the NPSS can be monitored effectively.

Folkard says: “I think the fact that the Revenue has 16 enforcement teams working to enforce the national minimum wage nationwide shows that policing will be a costly challenge for the NPSS.”

Winterthur Life pensions strategy manager Mike Morrison says: “The Government will never be able to police the stuff that goes on behind the scenes at firms. Prevention is better than cure and the Government should be looking at what incentives it can provide to encourage people to stay in the scheme.”

But Folkard says: “The fact that so many teams are in place to enforce the minimum wage would suggest that prevention is not as easy as it sounds.”

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