Technical changes to automatic enrolment - exceptions to employer duties

14 February 2014

The government has published their response to the consultation on exceptions to the automatic enrolment employer duties.

Currently, the automatic enrolment legislation relies solely on the jobholder to determine whether they should opt out of pension saving. The Department for Work and Pensions (DWP) state that it became apparent during the early days of live running that pension saving, or further pension saving, may not be appropriate for everyone.

In March 2013 the DWP issued a consultation ‘Technical Changes to Automatic Enrolment: Public consultation on draft regulations and other proposed changes’.

Within this consultation proposals were described to insert a clause in the Pensions Bill to provide regulation making powers to exclude workers of a prescribed class or description from the scope of automatic enrolment. As well as setting out some ideas on how such a power might be used, the DWP asked respondents to tell them if there are categories or descriptions of worker for whom automatic enrolment is inappropriate.

The DWP want to offer employers some more flexibility, so that in a limited number of specific situations, affecting only a small number of workers, employers are not obliged to go through the process of automatic enrolment. This will also benefit individuals for whom pension saving is not appropriate, who will not have to go through the process of being automatically enrolled and having to opt out. The consultation looked at a range of proposals to dis-apply the statutory obligation on employers to put certain groups of workers into pension saving.

Views were sought on four situations, where further private pension saving may not be in the best interest of a worker. The responses received reinforced representations already made that there is a strong case for government to permit employers not to enrol workers who:

• have tax protected status for existing pension savings
• are on the brink of leaving employment
• have given notice of imminent retirement
• recently cancelled membership after being contract joined.

The DWP remain confident that the right to opt out remains the most suitable option for all other workers who do not wish to remain in pension saving.

The next step is to develop proposals for workable exceptions that provide real value for both individuals and employers. Also being considered is how to accommodate circumstances where an employer may not know about the person’s individual circumstances (the tax issues are a prime example). Final proposals will be brought forward, with a draft Statutory Instrument for consultation in due course. Any regulations are subject to Royal Assent for the Pensions Bill currently before Parliament.

Read the full response to the consultation on exceptions to the employer duties.