Podcasts App - Auto Updating not refreshing with subscription

I've downloaded the Podcasts App on my iPhone 5 and I have all the settings for subscriptions to automatically download new episodes and ONLY keep unplayed episodes (all set from within the app and independent of iTunes). However, while it automatically refreshes to show me new episodes, it does not automtically download the new episode and it is keeping all the episodes I have already listened to. I've also stopped syncing my podcasts via iTunes since I read this app would do it for me, a functionality I have been wanting for a long time. Is any one else having this problem, or know of a way to fix it? Have I missed a simple setting somewhere, or is this a bug?

Thanks.