Delays to pension payments are hurting workers

A PENSION plan is a great way to build up a pot for retirement. Few wish to rely solely on the state. Auto- enrolment was introduced in 2012 to encourage anyone over 22 years to contribute five per cent of salary which employers top up by at least three per cent.

Around 10m are saving this way. Last year employees contributed £ 6.3bn to occupational pension schemes, up 13 times on the 2009 level. Some staff pay in more and forego a salary increase by opting for a higher amount into their pension.

When the pay slip showing the various deductions is received, staff would expect their pension donation to have been forwarded to the provider. They would not question that their money – as well as the employer’s contribution – had been withheld by their company.

Yet that is exactly what is happening on an abhorrent scale. The regulator relaxed the rules which required employers to be prompt in passing over the funds. The Pensions Regulator says enforcement cases in the three months to June had fallen by over half to 15,733 by comparison with the previous quarter.

Royal London has revealed that one in 10 pension schemes missed at least one month’s contribution since lockdown. Quite why the regulator set the sloppy time limit of 90 days rather than seven or 14 is questionable but to then raise it to 150 days shows no understanding for the risk that staff are taking.

This means that companies can use the money for five months. Staff miss out on all growth in the fund during that time. If their firm fails, not only do they lose their work but find their pension pots have been depleted and the insolvency service will be called upon.

The Government charitably gave companies who had furloughed staff a three per cent component to pay the employer’s pension contribution. It was not intended to boost a firm’s liquidity.