Defined benefit pensioners stand to lose out and are urged to respond to consultation closing this week.
As many as 800,000 workers – one in 20 – are being short-changed by their employer on their pension contributions, research shows.
Staff are getting less than the legal minimum into their pension pots, and sometimes nothing, because their employers break auto-enrolment rules, according to the Resolution Foundation.
All employers are meant to pay the equivalent of at least 3% of eligible employee’s salaries into a retirement scheme.
Agency staff and minimum-wage workers are most likely to be missing out on pension contributions, according to the research.
Only 2.9% of permanent employees have not been enrolled into a workplace pension. However, this rises to 10.5% among agency workers, 7.4% among temporary workers and 8.6% among workers earning within 5p of the National Living Wage (NLW).
These groups are also more likely than average to be short-changed even when they are enrolled.
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This was found to be particularly prevalent in areas of the labour market that are hotspots for other violations, such as a lack of paid holiday, and minimum wage non-compliance.
The Resolution Foundation criticised compliance activity – led by The Pension Regulator (TPR) as being “relatively light-touch to date”, with fines used only “sparingly”, meaning little incentive for firms to comply.
It is calling on the regulator to proactively target sectors where non-compliance is most common, such as employment agencies and hospitality.
Hannah Slaughter, economist at the Resolution Foundation, said: “While the focus of auto-enrolment has now turned to raising contributions and extending eligibility rules, policy makers need to add a third issue to the debate – tackling ‘under-enrolment’ where workers receive less than the legal minimum contributions, or no contributions at all.
“Now is the time for The Pensions Regulator to step up its enforcement – supported by greater resources – as part of a wider agenda for the government to make Britain’s post-Covid labour market are better environment for workers, and a far tougher one for the small minority of firms that break the law.”
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The report found non-enrolment is also particularly common in low-paying sectors, such as admin and support services (6.9%), agriculture (4.7%), and hotels and restaurants (5.7%) where even 3.1% of the enrolled do not get their legal pension contributions.
More than 10 million employees have joined company schemes since 2012 when it became mandatory for employers to auto-enrol staff.
The levels of underpayment of pension contributions uncovered by the report are in addition to the 9% of employees who actively opt out of paying into their company pension scheme, or the 19% of workers who are currently outside of auto-enrolment for eligibility reasons, including one in four working women.
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