An expert has warned thousands face missing out on vital retirement funds due to a significant pension blunder. Ex-pensions minister Steve Webb, now a partner at consultancy outfit LCP, said while auto-enrolement had helped millions, there were still thousands slipping through the net.
The Sun’s probe has uncovered numerous instances where employers failed to invest their workers’ well-earned pension contributions into their respective funds, thus reducing their retirement savings.
Mr Webb said: “Whilst automatic enrolment has been a huge success with over 10million more workers now saving into a pension, there is no doubt that there are thousands of cases when employers fail to comply with their legal duties.”
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Employees enrolled in workplace pension schemes typically see a portion of their earnings automatically cut and fed into their pension pot each payday. Employers chip in as well, with the government providing tax relief on these contributions.
Mostly, employees rely on the assurance that their deductions are bolstering their fund – which is supposed to expand as time goes by. However, this isn’t always the case. Industry specialists point out that it’s the smaller firms that frequently drop the ball.
Hundreds of grievances have been validated by The Pensions Ombudsman (TPO) in recent years, centered around employers not contributing to employee schemes as required. Alarmingly, the problem might be even more common than records suggest – with many workers possibly unaware or having not raised the issue with the ombudsman.
In several documented incidents, individuals discovered they were short of thousands of pounds in contributions.
Funds have been impacted, and the TPO has also compelled the companies to pay additional compensation for the “serious distress and inconvenience” caused. The Pensions Regulator (TPR) releases data on the number of fines they’ve issued for non-compliance with auto-enrolment rules.
Official statistics reveal that since the start of auto-enrolment in 2012, the watchdog has issued over 400,000, and more than 250,000 fixed penalty notices for failing to comply with auto-enrolment duties. In just the last six months, 20,000 fixed penalty notices were handed out.
Moreover, in collaboration with scheme providers, TPR has recouped over £700million in missing contributions owed to savers since 2012. Alice Haine, from Bestinvest by Evelyn Partners, the online investment service, commented: “Discovering that your employer has failed to pay pension contributions into a workplace pension scheme will naturally be frustrating and extremely worrying for employees. This not only damages trust in an employer but also raises concerns about the effect the missing payments will have on pension savings.”
Alice noted that while there have been several cases in recent years where “irresponsible” employers have withheld contributions, it is difficult to gauge how widespread this issue is.
She stated: “Cases where an employer has deliberately failed to make pension contributions – perhaps to save money in tough economic times, such as during the Covid pandemic – or failed to enrol a staff member into a workplace pension scheme at all – are These scenarios can be detrimental both to the employee and the employer’s reputation.