The CIPP’s quick poll on employee’s “pausing” contributions to workplace pensions, closed yesterday. For the first time , there is evidence of large scale pausing by employees who can’t afford their pensions.
The CIPP report 410 employers participating, describing engagement as “a really good result”.
Nearly 150 employers reported an upswing in employees “pausing” contributions of which 2/3 reported the increased cost of living as reason for stopping payments into the pension. Pausing involves stopping contributions until the next re-enrolment at which point contributions automatically resume unless the employee “opts-out” for the following three years.
Medium to large employers
The CIPP’s membership is primarily medium sized employers though most of the large employers are also members. The results are from payroll officers who often speak with staff when actioning changes. Of course many of the “reasons unknown” may be down to the increased cost of living but processed without that conversation. Quick polls are also available to a wider readership.
This information should be of help to the Pensions Regulator which has difficulty collecting real-time information on pausing. This is down to a missing field on payroll Real Time Information (RTI) reporting. Because employers do not report on employer contributions to workplace pensions under RTI, it is hard to differentiate between a member choosing to exchange salary for a nil contribution and a pause or opt-out.
With interest rates rising and expected to peak at 6%, this kind of reporting will become more important. Currently, cost of living issues are seen as impacting those on low-earnings, the fear is that those on higher earnings will be forced to choose between paying to a pension or a mortgage
Guidance to employers seeing an increase in pausing
The Pensions Regulator has issued guidance to employers on what it can and cannot say to employees thinking of opting out or pausing contributions.
On September 9th, Charles Counsell , TPR’s CEO made the following statement for publication on this blog and elsewhere.
I believe, even in difficult times, it is important people maintain their pension contributions, whenever they are able to.
Employers who seek to induce staff to opt out risk enforcement action and financial penalty – they cannot encourage their staff to reduce their contributions below the statutory minimum or opt out. It can only be the saver’s decision.
Staff can reduce their contributions and continue saving, but they would not be saving under automatic enrolment if contributions are less than the statutory minimum and the employer would not be required to maintain the employer contribution.
Employers who wish to keep contributing to their staff’s pension can do so. Pensions are a valuable part of an overall benefits package so it can be in the employer’s interests to do more than the minimum required by legislation.
While staff can ask to opt out, we are calling on employers to encourage employees to seek impartial guidance from the government-backed MoneyHelper service before they make any decisions.
At the start of August, we updated our website, for example, on pages covering employers’ ongoing duties and communicating with scheme members as well as under opting out, contacts for scheme members and communicating and reporting for DC schemes to this effect.
MoneyHelper provides pension and debt specialists who offer free guidance by telephone or online to help people find a way forward. It is a holistic service with financial guidance including information on dealing with debt, benefits, savings and avoiding scams as well as pensions and retirement.
We also know scammers thrive during periods of uncertainty and when household finances are being squeezed. Therefore, it is vital savers can spot the warning signs of a scam and avoid them.
This is why we advise that any staff seeking to transfer money from their pension should be directed to the ScamSmart website. This will help them get to know the warning signs of a scam and check the firm that they are dealing with.
This complements other saver protections, including rules meaning savers looking to transfer a defined benefit pension pot of more than £30,000 must take regulated advice and regulations, introduced last November, which empower trustees to halt suspicious transfers in certain situations.
We will continue to keep our position under review and work with our partners in the pension sector to ensure we are providing consistent messages.
CIPP and AgeWage
For more information on this work – contact email@example.com
Samantha O’Sullivan MCIPPdip Policy Lead
m: 07921 471039