Shrinking the catchment of the National Employment Savings Trust (NEST) as a means to save money would defeat the object of auto-enrolment, says the National Association of Pension Funds (NAPF).

The body is urging the government not to exclude low income earners, those close to retirement age and small firms from NEST, as they were among the chief groups who were originally meant to benefit from the 2012 reforms.

Increasing the earnings threshold at which employees begin to be auto-enrolled, from £5,035 to £10,000, would exclude 17 per cent of all employees, and 27 per cent of female employees, the NAPF said.

Excluding older workers is detrimental to their pension saving, and exempting small firms from auto-enrolling employees would ‘undermine one of the original objectives of the Turner Commission’. Two million employees could be excluded from auto-enrolment were the government to decide to exclude employers with fewer than 12 employees.

Instead, the NAPF believes the government should ensure they get the details of auto-enrolment right, meaning employers that already offer good schemes can continue to do so. They warned that if the rules are made too complex, there is a risk of leveling down – 27 per cent of schemes are currently yet to decide whether they will level down as a result of the auto-enrolment requirements.

The NAPF recommended that the definition of qualifying earnings be changed to one based on basic earnings, conforming with what most schemes currently operate; the requirement for auto-enrolment from day one is relaxed and three month waiting periods instead implemented; that employees be allowed to opt-out during the waiting period; and that employers be allowed greater flexibility to determine their own staging dates.

Share Story: