Last reviewed 12 March 2020
According to figures published by the Office for National Statistics (ONS), more than 6.3 million UK employees are not receiving employer contributions to a workplace pension.
This is despite the fact that auto-enrolment into workplace pensions has been in place since October 2012 and has helped increase the proportion of employees with workplace pensions from 47% in 2012 to 77% in 2019.
The reason why so many are still excluded is because employers do not have to automatically enrol staff earning less than £10,000 a year, or under the age of 22. The rules also exclude the first £6136 of pay when calculating the minimum contribution based on wages earned.
According to the TUC, the combined effect means that low-paid workers miss out on up to £300 of annual pension contributions from their employer.
It argues that part-time workers are at particular risk of missing out with only just over half (58%) of part-time employees belonging to a workplace pension, compared to 86% full-time workers.
This means women are disproportionately affected, as they are three times more likely to be in part-time work.
General Secretary Frances O’Grady said: “No more excuses — it’s time the Government ended this injustice. Pension schemes are a vital part of earnings. There should be a pension contribution in every pay packet.”
The TUC says that workers generally need total contributions of at least 15% of their wage to be sure of a decent income in retirement. It is calling on the Government to remove the earnings limits, and to raise the minimum contribution required from employers.
It also wants to reduce the age qualification to 18 years-old so that millions more young workers can be auto-enrolled into a workplace pension.
Comment by Andy Willis, Head of Legal at Croner
Despite the calls from the TUC, there are currently no plans to make amendments to legislation regarding pensions, and this is not likely to change any time soon.
That said, scrutiny remains high in this area, and these figures, therefore, reaffirm to employers the importance of getting pension contributions right for all of their staff.
Alongside the potential legal ramifications, failure in this regard could result in poor ongoing staff relations and, potentially, the loss of otherwise valuable employees.
While for many employees, the future implications of pension contributions may seem to be something to worry about later on, employees are increasingly drawn to jobs that go one-step beyond in terms of progression and ongoing security.
A robust pension scheme makes sure to follow all legal requirements can be a highly efficient way of attracting key talent.