Auto-enrolment: powers to create general exceptions
As auto-enrolment legislation currently stands, an employer cannot opt out any employee on their behalf from auto-enrolment – the legislation relies solely on the jobholder to determine whether they should opt out of pension saving.
This however, could change…
The Department for Work & Pensions (DWP) invited views on its current thinking in the recent public consultation Technical Changes to Automatic Enrolment and sought further information about its initial assessment of circumstances in which automatic enrolment might not be appropriate for certain workers, in order to help simplify the legislation.
Employers that have already reached their staging dates shared their concerns about being forced to automatically enrol some individuals whose circumstances mean that this is undesirable for the jobholder or is impractical for the employer or pension scheme.
There are now proposals to look at three specific circumstances in which the benefits of being automatically enrolled are outweighed by either the practical, financial or legal consequences, as released in a recent policy paper by the DWP:
- Where someone hands in their notice and their period of notice spans their automatic enrolment date (the legislation currently obliges an employer to automatically enrol this person even though they know that they are about to leave their employment).
- Where an active member of a money purchase scheme gives notice of retirement and stops making contributions before the purchase of an annuity.
- Where individuals will lose certain tax breaks due to considerable pension savings already accrued (at the moment the only option available to those individuals who have this protection and wish to retain it is to opt out after they have been automatically enrolled. If for any reason the jobholder doesn’t do so within the time limit they could face significant tax charges).
Melissa Goddard, Director of Pension Solutions, Ceridian said:
Proposals to take a more practical approach to the legislation are always welcomed – these particular elements don’t currently make for a great employee experience, especially if the associated communication isn’t right, and if badly managed could result in damage to Employer Brand.
Changes that put the choice back in the hands of the employer to do what is right for their workforce can only be a good thing.
The DWP is due to consult on these proposals in the autumn.