TPR remind employers – employees have to be enrolled before they can then opt-out

21 August 2017

The bulletin for the first time, as well as including data on automatic enrolment compliance, also includes a link to the names of pension schemes whose trustees have been fined for failing to complete scheme returns or annual chair’s statements.

In addition to enforcing compliance, TPR also have an obligation to educate and use the bulletin to advance this by reminding us that during the course of their announced inspections a number of employers have claimed to be unaware of the formality of their duties and have simply been trying to ‘do their staff a favour’ by offering them the option of opting out up front.

“…but whether their motivation was genuine, or whether they were simply trying to get out of paying their staff the pension contributions they were due, the result was the same – they were in breach of their legal duties.”

Employers need to follow all the steps in the TPR duties checker, including setting up a scheme, putting eligible staff into it and writing to them, before they can choose whether to stay in or opt out.

TPR case study

“This London-based car hire company had a staging date in January 2016. They sent a letter to their staff, telling them they’d soon be automatically enrolled, and that if they wanted to opt out ahead of this time they should sign and return the form.

In early April of this year we carried out an inspection as part of our compliance validation drive. They had claimed to have zero workers, but our intelligence suggested otherwise. The employer claimed that ill health, financial difficulties and bad advice from their accountant had contributed to their failure to comply. Their accountant had drawn up the letter that was sent to employees, with a tear-off slip asking them to fill it in if they wanted to opt out.

As the employer had failed to put any of their staff into a pension scheme, we sent them a compliance notice, warning them that we would fine them unless they quickly put things right.

Six weeks later they sent us proof of their compliance, the letters they’d sent to their staff and confirmation that they’d automatically enrolled the 13 people who were eligible. They also provided evidence that they’d backdated over a year’s worth of contributions to their original staging date, and were finally compliant on 8 June 2017.”

The key reminder that employers and advisors should take from this bulletin, if one is needed, is that whether the intention is to help staff or indeed avoid paying into their pension scheme, the law is the same and, regardless of their stated wishes, they cannot opt out before they have been put in to a pension scheme.