Hundreds of thousands of workers miss out on pension contributions
One in 20 workers are ‘under-enrolled’ in company pension schemes as they receive less than the legal minimum or no contributions at all.
According to the Resolution Foundation’s Enrol Up report, it found evidence of non-compliance when it comes to auto-enrolment, with part-time, temporary, agency and lower-paid workers more likely to miss out on pension contributions.
It found that 3.1% of employees are ‘under-enrolled’ while 1.7% who have been enrolled are receiving less than the legal minimum contributions. Further, while 2.9% of permanent employees haven’t been enrolled, this rises to 10.5% for agency workers, 7.4% for temporary workers and 8.6% for those within 5p of earning the National Living Wage.
Drilling down into sectors, those working in admin and support services, agriculture, hotels and restaurants are more likely to be missing out.
It added that the levels of under-enrolment are in addition to the 9% of employees who actively opt out of paying into their company pension scheme, or the 19% of workers who are currently outside of auto-enrolment for eligibility reasons.
While the report said that overall auto-enrolment has been a success with more than 10 million employees joining company pension schemes since 2012, industry watchdog – The Pensions Regulator – has been “relatively light-touch” when it comes to issuing fines for non-compliance.
It should build on the success of auto-enrolment by “upping its compliance activities”. The report’s author, Hannah Slaughter, said this should include proactively targeting sectors of the economy where non-compliance is most common, such as employment agencies and in the hotels and restaurants sector. It warns that the weakness of the labour market in the wake of the current crisis risks leading to greater non-compliance.
‘One-in-ten workers aren’t getting the pensions they deserve’
Slaughter, economist at the Resolution Foundation, said: “The auto-enrolment of ten million workers into company schemes since 2012 has been both a huge policy success, and a major boost to the retirement incomes of millions of households.
“But while the focus of auto-enrolment has now turned to raising contributions and extending eligibility rules, policy makers need to add a third issue to the debate – tackling ‘under-enrolment’ where workers receive less than the legal minimum contributions, or no contributions at all.
“Around 800,000 workers across the economy are currently ‘under-enrolled’, and the problem is particularly acute among agency workers and those on the minimum wage, where around one-in-ten workers are not getting the pensions they deserve.
“Now is the time for The Pensions Regulator to step up its enforcement – supported by greater resources – as part of a wider agenda for the Government to make Britain’s post-Covid labour market are better environment for workers, and a far tougher one for the small minority of firms that break the law.”
A spokesperson for The Pensions Regulator, said: “The Resolution Foundation’s report makes clear that 98.7% of workers enrolled in a workplace pension are receiving the appropriate level of employer contributions.
“This means the vast majority of employers are successfully meeting their auto-enrolment duties and are doing the right thing for their staff.
“For the small minority of employers who fail to comply with the law, we will use our statutory powers where appropriate, including issuing fixed and escalating penalty fines
“Between 2019/20, we issued 48,267 fines for failures to comply with AE duties.”