AE has come a long way, but we all have further to go

Last month marked 10 years since the start of automatic enrolment (AE). In that time, AE has changed hearts and minds about pensions.

Providing a workplace pension is now no longer confined to a minority of employers and staff across all employment sectors now expect a pension as part and parcel of their job.

At The Pensions Regulator, we are all extremely proud of our contribution to the success of the roll-out and the huge impact AE has had on the savings landscape.

The deep-rooted social change brought about by AE is not only our success. Introduced by government in 2012 to tackle falling pensions participation, it has involved ongoing collaboration with and commitment from the pensions industry including pension and payroll providers and advisers.

However, AE is predominantly a success that belongs to employers all across the UK. They have embraced and committed to AE and have worked to ensure they meet their workplace duties so that staff receive the pensions they are due. To date, more than two million employers, both old and new, have successfully met their legal duties.

Thanks to AE, well over 10 million people are now newly saving, or saving more into a workplace pension. Recent research by the Department for Work and Pensions (DWP) showed that over the last decade pensions participation has increased from 56% to 89% and we have seen annual pensions saving increase by around £41bn since AE’s introduction.

Further DWP research on employer perspectives on AE also shows most employers think it is a good policy and are supportive of its intention to increase pensions saving so that staff can look forward to the retirement they are planning for. It’s testament to the support of employers for AE that 55% of eligible staff receive employer contributions that are higher than the AE statutory minimum.

Ensuring the success continues

Since the start of the roll out, TPR has processed 3.2m declarations and redeclarations of compliance, sent out 12.8m letters, handled 1.8m customer enquiries and worked on 730k enforcement cases. Our enforcement activity has led to more than £500m late or missing pensions contributions being paid into schemes.

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 correct and up to date.

We recently carried out a series of in-depth compliance inspections of more than 20 large employers across the UK, with a total of nearly 1.5 million staff. The inspections were to check employers are complying fully with workplace pensions law.

While the employers we inspected remained committed to AE, we found a number of common errors in respect of calculating pensions contributions and communications to staff. We are now alerting employers to ensure they do not skip important steps in complying with their ongoing duties and to consult TPR’s online information.

We are also urging employers to ensure they comply with their re-enrolment responsibilities. Re-enrolment is important because it gives staff who opted out a fresh opportunity to start saving.

In line with our risk-based approach, we will continue to use our enforcement powers where employers fail to meet their duties. We monitor employers of all sizes to make sure staff get the pensions they are entitled to, and we’ll shortly be launching a new campaign warning employers that we spot non-compliance and will take action where appropriate, to protect savers.

Helping savers get to know their pensions

Looking ahead we also want to see more savers get to know their pensions. We support the introduction of the engagement season and the new pay your pension some attention campaign which brings pension providers, government and key stakeholders together to deliver vital information to savers to help them understand and engage with their pensions.

We also look forward to the launch of pensions dashboards which is a crucial step towards helping savers to get to know their pensions, make good decisions and plan for the retirement they want. Trustees should be taking action now to ensure they meet their connection deadline and consult our guidance which sets out the steps they need to take to comply with their pensions dashboards duties.

While it is right that we pause to celebrate how far we have come since the start of automatic enrolment a decade ago, we are not complacent. We want to see employers continue to meet their duties and more savers getting to know their pensions.

By Mel Charles
Director of Automatic Enrolment