Is it illegal for an employer not to pay a pension in the UK?

MILLIONS of workers in the UK are automatically enrolled into their company’s pension scheme when they start a new job.

Here’s all the info on what bosses need to do to avoid breaking the law.

Workplace pensions allow us to save towards our retirement

Companies are obliged by law to contribute to employees’ retirement funds

Is it illegal for employers not to pay pension contributions?

All employers must offer a workplace pension scheme by law, which is paid into by the company and the employee.

Money paid into a pension is also subject to tax relief, which means any cash that should have gone to the Government in tax is paid into your pension instead.

If you earn over a certain amount, companies also have to automatically enrol workers into it – unless they opt out.

What is pensions auto-enrolment?

HERE’s what you need to know about pensions auto-enrolment:

What is pension auto-enrolment? 

Since October 2012, employers have had to enrol their staff into workplace pension schemes as part of a government initiative to get people to save more for retirement.

When does auto-enrolment apply? 

You will be automatically enrolled into your work’s pension scheme if you meet the following criteria:

You aren’t already in a qualifying workplace scheme.
You are aged at least 22.
You are below state pension age.
You earn more than £10,000 a year
You work in the UK.

How much do I contribute? 

There are minimum contributions that you and your employer must pay.

Your minimum contribution applies to anything you earn over £6,240 up to a limit of £50,270 in the current tax year. This includes overtime and bonus payments.

A minimum of 8% must be paid into the pension, with you contributing 5% and your employer paying at least 3%.

What if I have more than one job? 

For people with more than one job, each job is treated separately for automatic enrolment purposes. 

Each of your employers will check whether you’re eligible to join their pension scheme. If you are, then you’ll be automatically enrolled in that employer’s workplace pension scheme.

Can I opt out?

You can choose to opt out, but you’ll miss out on the contributions from the government and from your employer. If you do choose to opt out you can opt back in later.

Most people get a state pension from the Government which covers basic needs – but it’s also a good idea to try and save some extra money in a pension fund, to give you a decent standard of living in retirement.

The state pension age is currently 66 but is due to rise to 67 from 2026.

The Pensions Act 2008 was brought in to make it the law that pension schemes have to be offered to workers – or else companies could face huge fines.

What are the legal obligations of employers regarding pension contributions?

Employers are legally obliged to offer a pension scheme to workers.

If someone earns over £10,000 a year and they are over 22, they must be signed up to the pension scheme automatically – however they can opt out if they wish.

Once someone is enrolled into the scheme, the company must then pay at least the minimum amount into it along with the employee.

It’s worked out as a percentage of earnings over a certain amount, and so the actual amounts depends on how well someone is paid.

As of July 2024 the minimum requirements apply to what is earned each month above £520, or each week above £120 – so you’d take this amount off your total pay to work out the percentage.

Amount contribution applies to (wages minus £520)The minimum the employer has to payAmount the worker paysTotal minimum contributionPercentage of earnings3%5%8%Earning £1,500 a month£980£29.40£49£78.40Earning £2,500 a month£1,980£59.40£99£158.40Minimum contributions as of July 2024 – from Moneyhelper.org.uk

What happens if my employer fails to pay my pension contributions?

There are potentially big fines for companies that don’t meet their obligations when it comes to paying into your pension pot.

But they’ll get the chance to make things right first.

The Pensions Regulator (TPR) may issue the company with an enforcement notice, but this may include a fine if it thinks the firm deserves it.

TPR a government-run body which lets workers tell them if their bosses aren’t contributing when they should.

Can I report my employer for not paying pension contributions?

There are ways to report your employer if you think they’re not meeting their obligations.

TPR says employees should speak to their company first if possible, as it might be quicker and easier to deal with it directly with them.

If that doesn’t get you anywhere, you can “whistleblow” to the regulator and let them know your concerns.

They’ll then investigate if they think there might be something dodgy going on – but they’ll need access to your payslips and any other letters from the company.

Companies face big fines if they don’t help workers save for their retirement

It’s the law that companies have to offer a pension to eligible employees

What are the consequences for employers who don’t pay pension contributions?

In the first instance, employers will be investigated by TPR if someone has raised a concern.

The company may get a letter warning them they need to take action, giving them chance to sort things out before it goes any further.

A statutory notice may then be issued – this tells them they must meet their obligations and make up for any unpaid contributions.

If the employer still doesn’t comply, they can then be hit by a fine:

A fixed £400 penalty notice is issued in the first instance

A further escalating penalty notice can then be issued in the first one doesn’t work – this can be a daily rate between £50 and £10,000 depending on how many people they employ

A further fine can then be issued of between £1,000 and £5,000, depending on the number of employees

Companies will have to complete a declaration of compliance – this is where they let the regulator know they’ve met their requirements.

The Pensions Regulator has the power to force businesses to give information, and they can also inspect their premises if they need to as well.

How can employees ensure their pension contributions are paid?

There are a number of ways to check if pensions contributions are being made correctly on your behalf.

Companies must write to workers to let them know when they’ve been enrolled into a pensions scheme.

In this letter they must explain:

the date they’ve added you to the pension scheme

the type of pension scheme and who runs it

how much they will contribute and how much you’ll have to pay in

how you can leave the scheme if you want to

It’s also worth checking your pay slip.

Workers have the legal right to be given a payslip by their employer, with a couple of exceptions, such as if you’re:

not an employee or ‘worker’, for example a contractor or freelancer

in the police service

a merchant seaman

a master or crew member working in share fishing (paid by a share in the profits or gross earnings of a fishing vessel)

The pay slip should list what things have been deducted from your total pay.

You can also check with the company who the pension account is with, which should have been detailed in the letter you received from your employer.

Normally they’ll have a website where you can sign up to manage your account and see what contributions have been made.

How do I consolidate my pension?

IF you have several workplace pensions that you’re no longer paying into, you might be better off consolidating them into a single pot.

There are several advantages to this.

The first is that by having your savings all in one place, you’ll only pay one set of fees.

You can also choose which pension provider you want to transfer the different savings to, so you can pick the best one for you.

It also makes it easier to keep track of your money.

You might want to move all your money to whichever of your existing pots has the best fees, or you could move it all to your current employer pension (if you have one).

Alternatively, you may wish to move money to a private pension or use a consolidator service, such as Pension Bee, Aviva, or Wealthify.

Make sure you compare and contrast your options carefully so that you’re picking the best home for your savings.

You’ll need to look at fees but also might want to consider the investment options available.

If any of your pots are over £30,000 you’ll need to get independent financial advice, but even if you have lots of smaller pots you should consider speaking to an independent financial advisor (IFA).

You can use Unbiased or VouchedFor to find a recommended advisor near you.

Also ask whether you’ll be charged a fee to exit your existing provider and to join your new provider, plus whether the age at which you can access your pension is different – for most people this is currently 55, but is set to rise to 57.

You also need to ensure the pension you’re leaving doesn’t come with valuable added perks, or you could lose out.

Stay alert for pension transfer scams as fraudsters often target people transferring their pension with promises of investments that are too good to be true.

What should I do if my employer enrols me late in a pension scheme?

Employers have to backdate any missed pension payments.

The Pensions Regulator says they essentially have to make sure workers are back “in the position they would have been in if you had complied on time”.

Normally the worker would also have to pay any contributions they’d missed – however the company can sometimes be made to cover this amount as well.

Are there penalties for employers who fail to comply with pension regulations?

Not putting eligible staff into a pension scheme and knowingly providing false information in a declaration of compliance are criminal offences.

The maximum punishment is two years in prison or a fine.

If companies don’t pay their fines, they can be recovered through the courts.

What rights do employees have if their employer goes insolvent?

If your workplace goes bust, the pension payments you’ve made already will be safe.

This is because the pension assets are held in a separate trust overseen by a trustee company.

There is however a risk that your employer hasn’t passed on some of the monthly contributions you have already paid before becoming insolvent.

If this happens, you’ll need to contact the company that’s managing the insolvency and ask for compensation for the value of the missing monthly contributions.

Normally, your own pension scheme administrator or the Official Receiver will make this claim for you.

How can I claim missing pension contributions from my employer?

The Pensions Regulator will force companies to repay missed pension contributions – and they might have to pay interest on that amount too.

The rule of thumb is that a worker’s pension pot should be put back to the state it would have been in had payments been made correctly.

Pensions are there to allow us to have a comfortable retirement, so it’s important to keep an eye on what’s being paid by your company so you don’t suffer later in life.

Top tips to boost your pension pot

DON’T know where to start? Here are some tips from financial provider Aviva on how to get going.

Understand where you start: Before you consider your plans for tomorrow, you’ll need to understand where you stand today. Look into your current pension savings and research when you’ll be eligible for the state pension, and how much support you’ll receive.
Take advantage of your workplace pension: All employers are legally required to provide a workplace pension. If you save, your employer will usually have to contribute too.
Take advantage of online planning tools: Financial providers Aviva and Royal London have tools that give you an idea of what your retirement income will be based on how much you’re saving.
Find out if your workplace offers advice: Many employers offer sessions with financial advisers to help you plan for your future retirement.

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