Growing number of employers ‘not fully aware’ of auto-enrolment pension responsibilities

Regulator hails auto-enrolment process as a success, but experts call for more education and training directed at businesses

A growing number of employers are not fully aware of their duties around pensions auto-enrolment, according to analysis of official figures, prompting calls from experts for the government to increase education programmes aimed at businesses. 

Figures published by The Pensions Regulator (TPR) revealed that only 82 per cent of “micro” employers were fully aware of their obligations in regards to auto-enrolment, compared to 88 per cent in 2018.

Awareness among medium sized employers also dropped to 94 per cent from 98 per cent a year earlier.

Commenting on the report, Steve Webb, director of policy at Royal London and former pensions minister, said the decline in employer awareness of auto-enrolment responsibilities was “worrying” and could lead to workers missing out. 

“Auto-enrolment has been a huge success story, but it is vital that the momentum is maintained,” Webb said. “The government must sustain publicity around automatic enrolment, especially targeted at employers, if the programme is to continue to be a success.”

He told People Management that previous publicity by the government around auto-enrolment was very much focused on employers, but more recent campaigns “seem more consumer focused”. This shift in education and publicity could explain why more employers reported they were unsure of their legal pension responsibilities. 

“Part of the answer to this problem has to be the Department for Work and Pensions focusing more on employers on an ongoing basis,” Webb said. 

Under auto-enrolment legislation, employers have five duties they must regularly carry out. These include keeping records of all auto-enrolment activities; monitoring the ages and earnings of new and existing staff every time they are paid to check whether they are eligible to join the pension scheme; enrolling staff and writing to them as they become eligible to join the pension scheme; managing requests to join or leave the pension scheme; and paying contributions into staff members’ pension scheme.

Mark Futcher, head of workplace wealth at Barnett Waddingham, agreed it was critical the government built on auto-enrolment’s success by educating people and businesses on the benefits of the scheme and providing tools to increase engagement with savings.  

“Workplaces too ought to put pension provisions at the forefront of employer propositions, highlighting the long-term value they deliver to their staff,” Futcher said. “Many employers contribute more than the legal minimum, which we know is required in the longer run.”

TPR’s survey revealed 10 million more people are now saving due to auto-enrolment pensions, with 87 per cent of workers currently enrolled in a workplace pension scheme, up from 55 per cent in 2012. 

The rise in workers enrolled in workplace pension schemes comes despite concerns that this year’s increases in auto-enrolment contribution rates could lead to individuals dropping out of their schemes. Minimum auto-enrolment contributions increased in April this year from 5 to 8 per cent, with at least 3 per cent contributed by employers.

Darren Ryder, director of auto-enrolment at TPR, said there was little early evidence of a significant increase in opt-outs in relation to the hike in contribution rates, but the government and pensions industry would be “keeping a close eye on the impact of increases”. 

He said previous Department for Work and Pensions research showed most staff were pleased to be saving, were positive or neutral about the contributions increase and “very few expressed concern about affordability”. 

The regulator’s survey also highlighted that the steady rise in workers enrolled in workplace pension schemes has also led to more young people saving for retirement. In 2012, only a quarter (24 per cent) of 22-29 year olds were saving in a workplace pension scheme, a figure that rose to 84 per cent in 2018. 

Despite the increase in those enrolled in workplace pensions schemes, the majority (93 per cent) of employers told the regulator they did not find it difficult to keep up with ongoing duties related to auto-enrolment.