With more than 10 million people now newly saving or saving more into a pension, auto-enrolment has fundamentally changed the way people are planning for retirement.
But this far-reaching social policy is not standing still. Next month, we will see the last scheduled increase to minimum contributions, which will mean staff saving at least 5 per cent of their earnings and employers contributing at least 3 per cent.
This increase is an important next step in helping cement the success we have achieved so far.
Advisers have an important role to play in helping employer clients ensure they are continuing to meet their auto-enrolment responsibilities.
Making sure staff receive the contributions they are entitled to should be a straightforward task for employers. However, there are a couple of things they will need to check, which many will rely on their advisers to assist them with. For instance, they need to make sure both their pension scheme and payroll provider are ready for the change.
We have lots of information about what employers and advisers need to know about the changes here.
While it is not a legal duty for employers to tell their staff about the increases in contributions, we encourage them to do so. We want people to get to know their pension and appreciate the benefits.
Our latest employer duties survey showed the vast majority of staff are continuing to save and save more into their pension following last April’s increase in contributions. Employers reported fewer than 2 per cent of staff in medium, small and micro businesses asked to leave their workplace pension as a result of it.
The survey also showed most employers told their staff about the increases last year and, when asked by their workers about workplace pensions, felt they had the information they needed.
Most employers think auto-enrolment is good for their staff, including the increases in contributions. Almost half of medium-sized businesses and around a quarter of small and micro employers are paying at least some or all of their staff more than the current minimum employer contribution.
Taking action to protect savers
The majority of employers are compliant with their ongoing responsibilities, which include keeping accurate records, keeping track of ages and earning of staff to check when they become eligible and ensuring the correct contributions are being made.
However, we will take action where an employer fails in their duties and this can lead to financial penalty or court action. Indeed, we used our powers 21,814 times between September and December last year.
This is in line with the volume of employers with responsibilities and demonstrates we will not tolerate staff missing out on the pensions they are entitled to.
Employers do not save money by failing to make contributions as payments must be back dated so staff receive what they are due. Ongoing failure to make the correct payments may lead to a fixed penalty or escalating penalty notice.
Working with the government, the pensions industry and adviser community, we have changed the savings culture. Auto-enrolment is now business as usual for employers, staff now expect a pension as part of their jobs and 84 per cent of staff are now saving into a workplace scheme. Let’s ensure this success continues.
Darren Ryder is director of automatic enrolment at The Pensions Regulator