Four out of 10 employers contacting Now: Pensions did so either very close to their staging date or after it.
The news comes as TPR publishes figures to March 2016 that show 96 per cent of firms are fulfilling their duties on time.
Now: Pensions concerns come as former pensions minister Steve Webb, now at Royal London, has raised alarm that ‘millions face being unable to retire’ because of low contribution rates. Webb’s comments come in reaction to TPR figures showing that employer contributions have averaged just 3 per cent of qualifying earnings across DC pensions before the majority of small and micro employers have even signed up.
Now: Pensions has proposed the qualifying earnings definition be scrapped so contributions are a percentage of all earnings, not just those above £5,824 a year.
Now: Pensions CEO Morten Nilsson says: “Auto enrolment is working and, for the most part, employers are aware of their duties and appear to be taking action. But, there will always be time lag in TPR’s data as employers have five months from their staging date to complete their declaration of compliance.
“Smaller firms are likely to pose more of a challenge and already we’re seeing an increase in the number of firms coming to us late or after their staging date has passed. In Q2, 40 per cent completed their application either very close to their staging date or after their deadline had already passed – the highest percentage over the recorded quarters.
“To safeguard the long term success of the policy, contribution levels need to be urgently addressed. The 2017 review of auto enrolment presents the perfect opportunity for the government to set a clear path for increasing minimum contributions, to make sure auto enrolled savers have decent sized pension pots when they retire.
“As a first step, by removing ‘qualifying earnings’* from the auto enrolment calculation, the government could significantly improve outcomes for savers. There’s a widespread assumption that auto enrolment contributions are on every pound of earnings but in most cases this isn’t true.
“Qualifying earnings is frequently overlooked but has a corrosive effect pension pots which has long term consequences for savers.”
Royal London director of policy Steve Webb says: “The amounts going in to those pensions remain far short of what is needed for a comfortable retirement. Given that the firms who have so far taken part in automatic enrolment are the largest employers, the average contribution rate of just 3 per cent is particularly disappointing.
“The 2017 automatic enrolment review needs to consider how we get combined employer and employee contributions up to a realistic level as a matter of urgency. Without this, millions of today’s workers will simply find that they cannot afford to retire.”
