Nearly half of existing pension schemes are non-compliant

A staggering 45% of payroll schemes migrated to us from other payroll providers or from in-house payroll teams are non-compliant in calculating pension contributions correctly. This statistic is particularly alarming, given the regulations set by The Pensions Regulator in the UK.

Miscalculating employee and employer pension contributions, even in innocence, has significant implications for not only the business but its employees too. Pensions are a crucial aspect of compensation and retirement planning, and errors in contribution calculations have serious financial, legal and reputational consequences for all concerned.

Here, we highlight the far-reaching ramifications of inaccurate pension contribution calculations on employers and employees alike.

Non-compliance

Incorrect pension contributions by an employer lead to non-compliance with regulations set by The Pensions Regulator in the UK. Miscalculations may also breach contractual agreements with employees in relation to salary sacrifice schemes. This results in fines, penalties or in extreme circumstances legal action against the employer.

Reputational damage

Erroneous pension contributions suggest a lack of attention to detail and financial responsibility. Being publicly branded as incompetent or, worse, underhanded can take years or even decades to recover from.

Pension scheme trustee liability

Pension scheme trustees face complications in their fiduciary responsibilities and interactions with the pension scheme members.

Burden of rectification

Correcting pension contributions requires time, effort and administration costs to rectify records, communicate with employees and adjust payment schedules. Even overestimating contributions is damaging, as it ties up unnecessary capital that could have been used for other business purposes and still needs rectifying.

Add to that the incalculable cost of cleansing the company’s name that could be mercilessly sullied by the media.

Impact on employees

Underfunded pension schemes leave retirees with insufficient funds for their retirement needs. Employees still in employment find their trust in the company’s ability to manage their financial wellbeing and retirement planning eroded, leading to lower morale and engagement, and potentially a flood of resignations or grievances.

In conclusion

Businesses navigating the evolving regulatory landscape must prioritise meticulous attention to pension calculations, backed by robust systems, regular audits and proactive communication with employees.

Our expert team can ensure that you not only avert the negative consequences of pension contribution errors but also cultivate a culture of transparency, responsibility and long-term financial security for both the business itself and your people.

Contact us for a no-obligation discussion.