Employer never auto-enrolled me in a workplace pension, now I'm leaving the company. What to do?

lizzie201296

Thrugelmir said:

 Have you had a face to face conversation as to how your employer will rectify the shortfall?  Perhaps mention in passing that unless there's rectification that you'll take legal action. 

I'm gearing myself up for this conversation but want to make sure I have all my facts straight - he is a master of changing the subject/avoiding the question etc (hence being continuously brushed off when it's been raised previously!).

pip895 said:

My thoughts are - are your former employers solvent- presuming they are, the reason the pension never got set up is probably because it was hassle - maybe the one other employee wasn't bothered.  Your best bet is to give them an easy way out - might be worth while talking to the pensions people at your new company and see if your former employer could pay in a lump sum directly (their 3%).  You could then up the percentage you put in monthly and pay off your shortfall over time.  Use the threat of the small claims court if they don't sort things out - they will probably take the path of least resistance.  

This is exactly the situation - they just avoided doing it because they thought we were too stupid to notice/care/know what to do about it! My plan is to essentially say 'you owe me over a year's worth of pension contributions, it's up to you how you want to pay these but I expect them to be paid within the next month or I will look at legal proceedings'.  Dreading the conversation but hopefully as you say, they will want to avoid legal action. My worry is that they'll think I'm calling their bluff  

lizzie201296

Hoping if I restart this one I'll get some replies - I've had an update from my employer!
So, my employer has acknowledged their mistake in not enrolling us automatically and have said that they are now set up with Nest and will be backdating their contributions (although I'm yet to see any paperwork to confirm that I have been enrolled...). However, they have presented me with two options:
1. Opt out, and therefore receive nothing (which I don't want to do).
2. Stay opted in, and we must both make backdated contributions. They have said that while usually I would be liable to pay my 5% and they the 3%, they are happy 'as a gesture of goodwill' to switch this round so they pay the 5% and I the 3%. However, even at 3% this still leaves me with a £700 payment to make which I really don't think should be up to me since their incompetence/negligence (whatever you want to call it) put me in this position in the first place. They have also said that the backdated payment must be made as a lump sum (ie. cannot be made as increased payments over time), which is even less possible (I can't afford to drop £700 in one go, especially as I have just received a £743 tax bill from HMRC because, surprise surprise, my boss has been doing his PAYE system wrong... there'll be another thread about that soon!). 

So, what are everyone's thoughts? I'm loathed to agree to their 'offer', as I don't think I should have to pay anything at all - 15 months is far too long to go 'oops we didn't know'. And especially if my only option is to pay it as one lump sum, that feels like I'm being held to ransom - I physically can't afford to drop that much cash in one go, so by saying this is my only option if I want anything in the pension feels very unfair.

I've spoken to everyone out there about this (Regulator, PAS, Citizens Advice, Nest) and I can't say they've been very helpful. They've all said that yes, technically we are both liable however the employer can make the full 8% contribution if they wish. I would argue that in this instance they definitely should make the full 8%, but how can I make them do this? Citizens Advice mentioned that it may be worth seeking legal advice mainly due to the fact that this is also a breach of contract issue (it is in my signed contract that I would be enrolled in a pension scheme), however that fact that they have finally got round to it may 'solve' that for them as technically I am now enrolled - the fact that it's 15 months late may not be seen as an issue?

I'm really annoyed as I think they should just contribute the full amount - an extra £700 means nothing to them but they have made it sound like they physically can't do that and that we both must pay it in as a lump sum. I don't see why they wouldn't just offer to cover it all as a 'gesture of goodwill' - am I being unreasonable in expecting that?

Does anyone have any thoughts as to how I could approach this, how I could get them to contribute the full 8% and just generally if you agree with me (or if I should just let it go and not get anything...). Anything greatly appreciated!

Thrugelmir

Your employer is under no obligation to meet your contributions. They've made a goodwill gesture in switching contribution %'s. Personally I'd grab the opportunity as a reasonable offer. Have you allowed for tax relief on your 3%? 

bowlhead99

The employer messed up and did not give you the chance to be in the scheme, which would have been lucrative for you because he would have given you free money as an employer contribution on top of giving you a way to invest your own money efficiently for your retirement. 

So the employer is fixing the position and saying that he WILL let you take the opportunity to join the scheme and backdate it if you would like to do so. You don't have to, but it would be very sensible to do so, for the free money you get from the employer. And to make up for mishandling it, he will boost the amount of money that he was obliged to put in, by two thirds (an extra 2% on top of the 3% he would normally have given you) which is great, because it means that you need to pay less in than you would have paid if you had been in the scheme all along.  

You would not have had the money jump up in value by that percentage if it had simply been dripped into Nest over the fifteen months. Extra free money will be a nice boost to your retirement.

I don't see why they wouldn't just offer to cover it all as a 'gesture of goodwill' - am I being unreasonable in expecting that?

Yes, you're being unreasonable. If you want to be in the pension scheme (which you do, because it is the way to get free money that you would not get if you were not in the scheme) you should expect to make some contribution to it. They owe you 3% of your annual salary and have said they will give you 5% instead. The extra 2% of your entire annual salary (or more, if it's 15 months) is a nice bit of compensation as it's two thirds more than the amount you would have got from them if you had joined the scheme on time.

For every £300 they were going to give you per the contract, they are offering to give you £500 instead. For them to pay it all (i.e. they pay 8% instead of 3%) would be quite unrealistic to wish for.  It would be like saying they owe you £300 so they will give you £800 just because it's a bit late.

Does anyone have any thoughts as to how I could approach this, how I could get them to contribute the full 8% and just generally if you agree with me (

You are on a hiding to nothing trying to 'approach them' to give you 8% into a pension scheme in exchange for 0% from yourself, when the contract says they should give you 3% and only if you pay 5%. You are leaving, so it's not like extra unnecessary generosity on their part would be buying the goodwill and loyalty of an employee who was going to give them many years of service. 

and just generally if you agree with me (or if I should just let it go and not get anything...)

So, your choice is to walk away and not join the scheme and get nothing, or you can simply put in £700 and get a whole pile of free money from your employer towards your retirement which will be much larger than what you put in after tax...  not just the 3% legal minimum for someone joining the scheme but 5%, so it costs them more than it costs you.

In exchange for paying only 3% of your gross salary (which you would have had to pay tax on if you had not contributed to a pension, so is practically not going to cost you as much money as it is worth to you in the pension), you will get a whole extra 5% of your gross salary as a free addition to your pension pot  It sounds like the best investment you could ever make, and would be foolish to turn down the opportunity and say you don't want to join the scheme after all because you think they should pay all your contributions too.

You won't get very far saying it is a breach of contract, given they recognise their error and are willing to rectify it and compensate you by paying part of the contributions that you would have needed to make out of your own pocket if you had been in the scheme from the beginning. The fact the employer is doing 5% rather than the legal minimum of 3% means you will end up with a better deal than if you had joined the scheme originally.

So, what are everyone's thoughts? I'm loathed to agree to their 'offer', as I don't think I should have to pay anything at all - 15 months is far too long to go 'oops we didn't know'. 

They are not just saying oops, they are saying oops and giving you extra free money to say sorry, on top of letting you contribute to the scheme like you wanted to all along. You might want them to pay all your contributions, well I'm sure we would all like our employers to pay all our pension contributions, but it's not going to happen.

And especially if my only option is to pay it as one lump sum, that feels like I'm being held to ransom - I physically can't afford to drop that much cash in one go, so by saying this is my only option if I want anything in the pension feels very unfair.

You have been complaining about not being in the scheme for 15 months and saying you wanted to make a contribution to get their free money. They have responded by saying OK, you are welcome to now make that contribution and in fact just feel free to pay 3/5ths of it and they will give you even more free money to make up the difference. It's not really their fault that you have spent all the extra pay that you have been getting which you could presumably have been setting aside to make the catch-up contribution on joining the scheme.   

If you want to buy-in to the pension, do it, it is a great return on investment because you will get 5% of your 15-month salary for doing it. Perhaps if you were sticking around with the company you could have appealed to their good nature to lend you the money or advanced you some pay to help you make the payment. It would have been worth a try. Clearly as you are leaving, they have no reason to do that as there is no reason to believe you would pay them back. If I were them, I would say it's a generous offer, take it or leave it, if you don't want to join the scheme after all, then don't.   

You are only cutting off your own nose to spite your face if you tell them that you don't want to join the scheme after all and they can throw all the free money in the bin. Practically speaking, if you don't have that £700 of net or gross pay (you haven't said which) to hand , you should beg borrow or steal it from someone to make the contribution and end up with a pension that's ~£2k bigger.

steampowered

The employer should have paid 3% into your pension. They are actually agreeing to pay 5%. Without you needing to take legal action.

That's a really great outcome. Personally I would bite their hand off !

In my opinion you should pay the £700. You should not see yourself as losing £700:
- If you had been making 5% pension contributions, you would not have had that £700 to begin with. In fact you would have been down £1,166 (if 3% cost you £700, 5% would have cost you £1,166).

- That £700 is going into your pension. You'll be glad to have that money when you retire. If you are a basic rate taxpayer, you will get an extra 20% top-up from the government due to tax relief, meaning you will actually get £840 in your pension.

NottinghamKnight

OP you should be making some contribution but the one valid question to ask is what growth in the pension you may have missed out on over that time. That would be a valid sum to expect to be contributed by the employer. 

lizzie201296

Thank you everyone - this makes perfect sense and I agree. Will accept the offer! Regarding the growth in the pension I may have missed out on over time - is this something that is normal to address or should I just let it go... will it be a lot/worth it?

NottinghamKnight

If a financial institution had not invested your money then you would expect them to make up the difference. In this case you are getting an additional uplift but you can ask and point out the issue about not getting any growth, if nothing else it would give the impression you are clued up on pensions and investments. In terms of the nominal loss then a pension might be growing at say 5% per year (this is the invested sum) so it's not a huge amount.