Research Reveals One In 20 Employees Are Missing Pension Contributions – And That Was Pre-Pandemic

A report released at the end of August has highlighted that over 800,000 workers eligible for a workplace pension are missing pension contributions or haven’t been enrolled at all. And that research was carried out before the pandemic began. It seems likely that since then this could have deteriorated further.

The Resolution Foundation’s report “Enrol up! The case for strengthening auto-enrolment enforcement” is based on three years of research into the progress of auto-enrolment. It’s highlighted a real problem given that many of those affected will not even be aware of the situation as it doesn’t affect their take-home pay. It could be storing up a significant shock for people affected in the future. There are estimates that around 3% of eligible employees who haven’t opted out have still not been enrolled in a pension scheme. The research also suggests that around 1.7% of workers are not receiving the right level of employer contributions.

It seems unlikely that this situation will have improved much during 2020 given the turmoil created by the pandemic and the associated payroll implications it’s created. The changes that have resulted from emergency payroll legislation introduced in response to the unfolding crisis have been significant.

Pension guidance has certainly been in a state of flux with the introduction of the Coronavirus Job Retention Scheme and subsequent modifications that allowed flexible furloughing and a return to working on a part-time basis from 1st July. There is no denying that the requirements are complex.  It would not be surprising if some employers have struggled to stay on top of it all and pension obligations have been unintentionally overlooked or misunderstood.

The Pensions Regulator is running a campaign to remind and guide employers of their pension obligations during this difficult period. As you’d expect, the information is extensive. But what are some of the key points it is highlighting?

• Employers need to avoid missing pension contributions for their employees. If they are having problems doing that for financial reasons, they should speak to their pension provider in case there’s flexibility over the due date of employer contribution payments.
• It’s possible some employees might ask to reduce or even stop paying pension contributions. If scheme rules permit, they can do so, or opt-out or stop active scheme membership if they wish. But employers must not exert any influence over them in making this choice. Employees will retain the right to start saving again either commencing at the next re-enrolment date, or before then if they wish.
• Re-enrolment and re-declaration of compliance will need to continue. Employers struggling to complete this because of the coronavirus pandemic will be allowed to assess staff at a later date – up to three months after the third anniversary of their staging date or duties start date.

Even since the time period covered by The Resolution Foundation research, making sure employees are getting the pension contributions they are entitled to has become more complicated. This complexity is certainly something that’s acknowledged by The Pensions Regulator and it is taking a sympathetic approach given the circumstances. But the bottom line is, no matter whether you have employees on furlough or not, automatic enrolment duties remain as important as they have always been. Further advice can be found on The Pensions Regulator website where guidance is being regularly updated.

A pension shortfall occurs when an employee does not receive the full pension contributions they’re entitled to. This could result from pension errors, such as miscalculations or failures to enrol eligible employees into a pension scheme.

A shortfall can also occur if employer pension responsibilities are not met, leading to significant financial gaps for the employee in the future. It’s important to regularly review pension contributions to ensure accuracy.

Yes, it is possible to backdate pension contributions in certain situations. If an employee was eligible but missed out due to late pension payments or administrative errors, employers can make up for the missed contributions.

However, you need to make sure they meet their legal obligations to correct any employee pension rights that were overlooked. Just remember the process for backdating contributions has to comply with HMRC and pension scheme rules.

If your business is finding pensions management to be time consuming and complex, why not contact us to find out more about our Pensions Regulator compliant systems? They are designed to automatically assess your employees on every pay run and will add eligible employees, process opt-outs and enrol any others who have opted in to join the pension scheme.

Even as the pandemic unfolded we’ve continued to provide our clients with accurate, fully compliant pension management as part of our payroll services, so please do get in touch to find out how we could help you too.