Report bosses who push workers to exit pension plans, says UK regulator

Workers should blow the whistle on bosses who are encouraging them to quit retirement plans to save companies money, the Pension Regulator has said.

The watchdog’s intervention comes after the Trades Union Congress, the UK’s main movement for organised labour, last week said more of its members were leaving their pension schemes to cope with the intensifying cost of living crisis.

The regulator said employers that sought to induce staff to opt out of their pension plan risked enforcement action and fines, and that employees should sound the alarm if this was happening.

It added that companies could not “encourage their staff to reduce their contributions below the statutory minimum or opt out. It can only be the saver’s decision”.

The intervention comes as businesses across the UK are also facing unprecedented financial strain from soaring energy bills, and demands for inflation-matching pay rises.

Official guidance states that an inducement is any action taken by the employer, the sole or main purpose of which is to attempt to induce a jobholder to opt out or cease active membership of a qualifying scheme.

More than 10mn UK employees are enrolled into company pension plans, and businesses have since 2012 been obliged to automatically enrol eligible staff into a qualifying scheme.

Under this model, employers pay at least 3 per cent of a worker’s pensionable salary into the retirement plan, with the worker contributing at least 5 per cent.

If an auto-enrolled employee reduced their monthly contributions to less than the minimum 5 per cent, they could continue saving but their employer would not be obliged to maintain its contribution,

The regulator said that even in “difficult times”, it was important for people to keep up their pension contributions “whenever they are able to, as stopping contributions could have a serious impact on their retirement living standards”. 

“While staff can ask to opt out, we are calling on employers to do the right thing and encourage them to seek impartial advice . . . before making any decisions.

“Anyone who is concerned their employer is encouraging them to opt out of their pension should contact our whistleblowing service,” it added

The consultancy Barnett Waddingham last month estimated that more than 1mn workers were looking to reduce their pension contributions to help pay for soaring living costs.

Unions have been on the alert following high-profile inducement cases, such as when an NHS trust was in 2016 referred to the regulator after it offered newly qualified nurses more pay if they opted out of their NHS pension.

“The law is clear, and any worker who is concerned about this should speak to their union,” said Jack Jones, pensions policy officer at the TUC.

Matthew Percival, changing workforce director at the CBI, the business group, said: “To be clear, employer induced opt-outs are illegal. The regulator is right to highlight the potential sanctions for firms taking such action.”