Automatic enrolment was one of the main reforms to emerge from the Pensions Commission in 2005. To combat dwindling retirement incomes, automatic enrolment makes it compulsory for employers to enrol staff without pension plans into workplace pensions (but allows individuals to opt out if they wish). It was an early application of behavioural insights. This obligation affects some 1.3 million employers and means that, by the time implementation is complete in 2018, around nine million individuals should be newly saving or saving more for their retirement.
Automatic enrolment is a complex, ambitious change that could easily have gone wrong. It required the Department of Work and Pensions (DWP), as the lead department, to design and deliver a new pensions scheme – something it had never done before. It also needed to strike the right balance between protecting employees and minimising the burden on employers; keep the opt-out rate among employees to a minimum; and give employers and other supporting organisations enough time to prepare for the change, while managing the inevitable risks and uncertainties of staging implementation over many years.
Given this tough terrain, it is all the more striking that implementation is going to plan. Our case study identified the following lessons:
- Invest in building consensus upfront: the seeds for success were sown back in 2002, when the Pensions Commission was set up. It first established a firm evidence base and then adopted a consensual approach to policy design, consulting widely before developing recommendations. Ministers at the time regularly engaged with opposition spokespeople to ensure their support – particularly important given the long timescale required to implement the changes. This way of working continued into implementation, with DWP adopting the role of relationship manager, maintaining a constant conversation with employers and employees.
- Build the right capability: the creation of an arm’s-length body, PADA (the Personal Accounts Delivery Authority) made it easier to bring in people with the right expertise, who could procure the £600m scheme and make informed decisions about delivery timetables based on their commercial experience. Devoting attention at a senior level to recruiting the right person to lead the most unusual part of the project – establishing NEST, the workplace pension set up by the government – paid off. But it wasn’t all about creating things from scratch – the role of The Pensions Regulator was successfully extended to include employers.
- Continuity of leadership: automatic enrolment was helped by the decision of several key individuals to stay with the project for a significant amount of time, in contrast to the high levels of turnover sometimes experienced in Whitehall. This was largely down to the permanent secretary at the time making it clear that he expected people to provide continuity and individual commitment to the project. Senior leaders from DWP, PADA and NEST agreed that they would stay the course.
- Understand citizen behaviours: the department also invested in getting a good understanding of the likely response of employees, which might explain the unexpectedly low rates of opting out. For instance, it commissioned research which showed that automatic enrolment could not rely on the inertia effect alone, without an effort to raise awareness about the changes. This has led to a highly effective awareness-raising campaign.
- Learn from the front line and adapt in real time – although the NAO rightly point out the biggest challenge is still to come, in the form of enrolling smaller employers, the staging of implementation has also provided opportunities for a more adaptive approach to delivery. DWP and The Pensions Regulator have become increasingly adept at keeping in touch with the changing landscape of delivery, sharing information and learning about what is working and adapting accordingly. The Shared Intelligence Forum, a space for feeding front-line intelligence into implementation planning, is one of the mechanisms that has been established. But just as important has been the role of ministers, who have sent out strong signals about the willingness of the department to listen.
Reporting has inevitably focussed on the risks of which the NAO warns, rather than on the success of the programme to date. Automatic enrolment may yet go wrong. But there are lots of positive lessons to be taken from progress so far.
Read the NAO report.