A pension revolution, but more work to do

Re-enrolling staff in a workplace pension is a legal duty

Automatic enrolment has led to an explosion in the number of people saving into a workplace pension.

Thanks to the combined efforts of government, the pensions industry and employers across the country, more than 10 million people are now newly saving or saving more because of automatic enrolment.

Recent DWP research shows that despite the financial pressures caused by the pandemic, staff have continued to save for their retirement and pensions contributions have remained steady.

With such success even through tough times, it would be easy to say that our work is done. However, while we have come a long way, we know there is more to do to ensure this pension revolution continues to provide better retirements for savers.

Some warning signs remain. We know for example that while the number of women saving into a pension is equal to the number of men, women are not saving as much. We also know that there are fewer people from some ethnic minority groups who are saving and that some workers with multiple jobs are missing out on the opportunity to save.

In our recently published Equality Diversity and Inclusion strategy, we pledged to work with government and the industry to look at ways of reducing inequalities in saving. We remain supportive of the 2017 automatic enrolment review proposals which seek to open up workplace pensions to more savers. In particular, we welcome proposals which will see the age threshold reduced so that younger people can start saving sooner.

We also continue to keep a close eye on the ‘gig economy’ which is set to grow further as the UK emerges from the pandemic and businesses recover. It is only right that workers who contribute to the economy have the opportunity to save for retirement.

We are calling on all employers in the gig economy to step up and do the right thing for their staff. We want to see employers in all sectors comply with their responsibilities voluntarily and promptly. We work to ensure all savers are protected – no matter what sector they work in and we will take enforcement action to ensure staff receive the pensions they are entitled to.

Keeping the wheels turning

Operationally, on the ground we continue to work to ensure employers know about their duties and have the support and information they need to comply. And we continue to take enforcement action where necessary to ensure eligible staff do not miss out on the pensions they are due.

Employers also have more to do. It’s crucial they continue to meet their ongoing duties, so staff receive the pensions they are entitled to. These include ensuring pensions contributions are up to date and completing re-enrolment responsibilities.

Re-enrolment is important because it gives staff who opted out a fresh opportunity to start saving. Indications are that often, when staff who originally opted out of their pension are re-enrolled by their employer, they take advantage of the new opportunity to start saving.

Another important milestone

Since the start of automatic enrolment, more than 1 million employers have successfully completed their re-declaration of compliance showing us that they have met their re-enrolment responsibility towards their staff.

Re-enrolment must be carried out by employers every three years within the three months either side of their original duties start date. Once employers have done this, they must complete their re-declaration of compliance. We will write to employers to remind them about their ongoing duties and there is an online step by step guide for employers.

Employers must check their systems and processes are up to date to ensure staff are re-assessed and put into a pension if they are eligible. Re-enrolment also gives employers a prompt to check that they are paying the right amount to their chosen pension scheme on behalf of individual members of staff. Employers should leave plenty of time to complete their re-enrolment responsibilities, so they do not risk a fine.

Employers who fail to complete re-enrolment on time will be issued with a compliance notice. This will set a deadline for action. Failing to comply will lead to a fixed or escalating penalty notice.

We know many employers are navigating challenging times and our goal is to support them by being clear about their duties. However, as we work to put the saver at the heart of all we do as a regulator, we will act where necessary to protect staff.