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A new report highlights those who are missing out due to the pension auto-enrolment scheme and calls for greater regulation of those areas of the economy most affected.
Nearly one-in-twenty workers are being ‘under-enrolled’ in company pension schemes by receiving less than the minimum legal contributions, or no contributions at all, with ‘under-enrolment’ particularly acute among agency staff and minimum-wage workers, according to new research.
According to the Resolution Foundation’s new report Enrol up!, auto-enrolment – which was introduced in 2012 as a way of encouraging working individuals to save for their retirement costs – has generally been a success, with over 10 million employees joining company schemes since 2012, but it says compliance activity from the regulator has been relatively light-touch to date, with few fines issued.
It notes that nearly one-in-twenty eligible employees – or more than 800,000 overall – are currently ‘under-enrolled’ – either by not being enrolled at all (3.1 per cent of employees) or by receiving less than the legal minimum contributions (up to 1.7 per cent of those who have been enrolled). It says under-enrolment is “particularly prevalent in areas of the labour market that are hotspots for other labour market violations, such as a lack of paid holiday, and minimum wage non-compliance”.
The report notes that while 2.9 per cent of permanent employees have not been enrolled, this rises to 10.5 per cent among agency workers, 7.4 per cent among temporary workers and 8.6 per cent among workers earning within 5p of the National Living Wage. These groups are also more likely than average to be short-changed even when they are enrolled.
The Foundation notes that the short-term nature of much agency and temporary work may make it harder to auto-enrol staff, but says they are no less deserving of employer pension contributions.
The report also finds that non-enrolment is also particularly common in low-paying sectors, such as admin and support services (6.9 per cent), agriculture (4.7 per cent), and hotels and restaurants (5.7 per cent) where, even of those who have been enrolled, 3.1 per cent are not receiving the pension contributions they’re legally entitled to.
The levels of under-enrolment uncovered by the report are in addition to the 9 per cent of employees who actively opt out of paying into their company pension scheme, or the 19 per cent of workers who are currently outside of auto-enrolment for eligibility reasons, including one-in-four working women.
The Foundation is calling for the Pensions Regulator to increase its compliance activities, including 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.
It also calls on the regulator to collaborate more with other enforcement agencies, such as HMRC, the Employment Agency Standards Inspectorate and, when its up-and-running, the Single Enforcement Agency, given the risks of multiple non-compliance.