Half of all pension records contain errors, some of which are so fundamental that one in 20 people’s monthly payslips may be wrong, according to data from Pensionsync.
The analysis found errors included contribution rates that are too high or too low, incorrect pension scheme identifiers, incorrect postcodes, incorrect spelling of names, incorrect pay period dates, incorrect contribution rates because tax relief is miscalculated and contributions made for workers who do not belong to a scheme because they have opted out or left.
The news comes as small businesses are increasingly struggling with the burden of administering pension schemes ahead of further changes in contribution rates. Latest figures from The Pensions Regulator show that fines imposed on employers for auto-enrolment errors more than tripled to £42m last year, up from £12.6m in 2017.
Pensionsync’s research shows there is a 50 per cent error rate in initial pension filings, and in around one in 20 cases incorrect contribution rates are being paid. The research covered data from contributions to over 10,000 schemes.
Pensionsync CEO Will Lovegrove says: “Our research shows that around half of pension records may be incorrect, at least for a time, and that in around one in twenty cases the actual contribution rates are wrong, which could obviously have serious consequences for the firm and the individual.
“The consequences for workers are that their payslip may not be right each month, but they would have no realistic way of knowing this. They automatically trust their employer to deduct the correct amount of tax and National Insurance, and will also trust that they have deducted the correct pension contribution too.
“However, if the wrong amount has been paid into the scheme, the worker may subsequently find they are asked to repay some of this money because they have received double tax relief.
“Alternatively the employer may have to correct errors if they paid the wrong sums in and they may need to either pay more into the scheme for each individual, or have to pay money back to the Inland Revenue.”
Pensionsync chair Baroness Altmann says: “Auto-enrolment is a force for good, but it can’t be right that there are currently no regulatory checks to ensure that data have been verified as accurate. It is vital that the Government and the regulator start to ensure that data in auto-enrolment pensions are regularly and thoroughly checked for accuracy.
“Pensions systems at most firms are in the dark ages, with information being entered manually. That risks storing up massive problems for them and for employees in the future because of potential security breaches and inaccuracies involving sensitive data.”