Is it illegal for an employer not to pay a pension in the UK?

MILLIONS of workers in the UK are automatically enrolled into a pension scheme by their company.

Here’s all the info on what bosses need to do to avoid breaking the law.

Is it illegal for employers not to pay pension contributions?

All employers must offer a workplace pension scheme by law, which is paid into by the company, the employee and the Government.

If you earn over a certain amount, they also have to automatically enrol workers into it – unless they opt out.

Most people get a state pension from the government which covers basic needs – but it’s also a good idea to try and save some extra money in a pension fund, to give you a decent standard of living in retirement.

The Pensions Act 2008 was brought in to make it the law that pension schemes have to be offered to workers – or else companies could face huge fines.

What are the legal obligations of employers regarding pension contributions?

Employers have the legal obligation to offer a pension scheme to workers, and to contribute to it if they’re eligible.

If someone earns over £10,000 a year, they must be signed up to it automatically – however they can opt out if they wish.

Once someone is enrolled into the scheme, the company must then pay at least the minimum amount into it along with the employee.

It’s worked out as a percentage of earnings over a certain amount, and so the actual amounts depends on how well someone is paid.

As of July 2024 the minimum requirements apply to what is earned each month above £520, or each week above £120 – so you’d take this amount off your total pay to work out the percentage.

	Amount contribution applies to (wages minus £520)	The minimum the employer has to pay	Amount the worker pays	Total minimum contribution
Percentage of earnings		3%	5%	8%
Earning £1,500 a month	£980	£29.40	£49	£78.40
Earning £2,500 a month	£1,980	£59.40	£99	£158.40

What happens if my employer fails to pay my pension contributions?

There are potentially big fines for companies if they don’t meet their obligations when it comes to paying into your pension pot.

But they’ll get the chance to make things right first.

The regulator may issue the company with an enforcement notice, but this may include a fine if they think it deserves it.

Can I report my employer for not paying pension contributions?

There are ways to report your employer if you think they’re not meeting their obligations.

The Pensions Regulator is a government-run body which lets workers tell them if their bosses aren’t contributing when they should.

They say employees should speak to their company first if possible, as it might be quicker and easier to deal with it directly with them.

If that doesn’t get you anywhere, you can “whistleblow” to the regulator and let them know their concerns.

They’ll then investigate if they think there might be something dodgy going on – but they’ll need access to your payslips and any other letters from the company.

What are the consequences for employers who don’t pay pension contributions?

In the first instance employers will be investigated by the Pensions Regulator if someone has raised a concern.

The company may get a letter warning them they need to take action, giving them chance to sort things out before it goes any further.

A statutory notice may then be issued – this tells them they must meet their obligations and make up for any unpaid contributions.

If the employer still doesn’t comply, they can then be hit by a fine:

• A fixed £400 penalty notice is issued in the first instance
• A further escalating penalty notice can then be issued in the first one doesn’t work – this can be a daily rate between £50 and £10,000 depending on how many people they employ
• A further fine can then be issued of between £1,000 and £5,000, depending on the number of employees

Companies will have to complete a declaration of compliance – this is where they let the regulator know they’ve met their requirements.

The Pensions Regulator has the power to force businesses to give information, and they can also inspect their premises if they need to as well.

How can employees ensure their pension contributions are paid?

There are a number of ways to check if pensions contributions are being made correctly on your behalf.

Companies must write to workers to let them know when they’ve been enrolled into a pensions scheme.

In this letter they must explain:

• the date they’ve added you to the pension scheme
• the type of pension scheme and who runs it
• how much they will contribute and how much you’ll have to pay in
• how you can leave the scheme if you want to

It’s also worth checking your pay slip.

Workers have the legal right to be given a payslip by their employer, with a couple of exceptions, such as if you’re:

• not an employee or ‘worker’, for example a contractor or freelancer
• in the police service
• a merchant seaman
• a master or crew member working in share fishing (paid by a share in the profits or gross earnings of a fishing vessel)

The pay slip should list what things have been deducted from your total pay.

You can also check with the company who the pension account is with, which should have been detailed in the letter you received from your employer.

Normally they’ll have a website where you can sign up to manage your account and see what contributions have been made.

What should I do if my employer enrols me late in a pension scheme?

Employers have to backdate any missed pension payments.

The Pensions Regulator says they essentially have to make sure workers are back “in the position they would have been in if you had complied on time”.

Normally the worker would also have to pay any contributions they’d missed – however the company can sometimes be made to cover this amount as well.

Are there penalties for employers who fail to comply with pension regulations?

Not putting eligible staff into a pension scheme and knowingly providing false information in a declaration of compliance are criminal offences.

The maximum punishment is two years in prison or a fine.

If companies don’t pay their fines, they can be recovered through the courts.

What rights do employees have if their employer goes insolvent?

If your workplace goes bust, the pension payments you’ve made already will be safe.

This is because the pension assets are held in a separate trust overseen by a trustee company.

There is however a risk that your employer hasn’t passed on some of the monthly contributions you have already paid before becoming insolvent.

If this happens, you’ll need to contact the company that’s managing the insolvency and ask for compensation for the value of the missing monthly contributions.

Normally, your own pension scheme administrator or the Official Receiver will make this claim for you.

How can I claim missing pension contributions from my employer?

The Pensions Regulator will force companies to repay missed pension contributions – and they might have to pay interest on that amount too.

The rule of thumb is that a worker’s pension pot should be put back to the state it would have been in had payments been made correctly.

Pensions are there to allow us to have a comfortable retirement, so it’s important to keep an eye on what’s being paid by your company so you don’t suffer later in life.