Gov’t denies enrolment exclusion for flexi-access savers

Gov’t denies enrolment exclusion for flexi-access savers

In a 29-page paper, the government has vetoed reconsidering auto-enrolment rules to take account of savers being given greater access to their pension pots under new pension freedoms.

Providers were asked should there be an exception to the auto-enrolment requirements for employees who wish to flexibly-access their pension rights.

According to the government’s response to the consultation of draft regulations on technical changes to auto-enrolment, the “overwhelming response” from respondees was that such an exception is not appropriate.

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A number of responses stated an exception could place ‘unwanted burdens’ on employers having to consider information provided to them by the employee and to come to a decision of whether or not to enrol.

“Some of these individuals who may flexibly-access their pension rights may be relatively low earners who are part of the target audience for automatic enrolment, and won’t have contributions paid that are anywhere near £10,000 so there is no obvious reason for them to be excluded.”

The paper also confirmed the government feels “it is not appropriate” for employers to auto-enrol an employee who is protected from tax charges under enhanced or fixed protection provisions given these are not the target audience for automatic enrolment.

As a result the requirement to automatically enrol and provide information to employees with tax protected status who would then need to opt-out has been removed.

The government has also clarified that where a worker or jobholder cancels membership of a qualifying scheme, during the 12 month period following that event, the employer has a discretion to enrol or re-enrol the worker.

After that 12-month period, the duty to enrol is lifted until the next automatic re-enrolment date. The 12-month rule therefore also applies where a jobholder cancels membership within 12 months of automatic re-enrolment.

Accordingly, if the employer staged during or after the 12-month period following a worker’s cancellation of his or her membership, there would be no duty to automatically enrol that worker until the next cyclical re-enrolment date.

In a bid to slash the amount of paperwork that has to be handed out to employees, the government is also ditching the requirement for employers to inform an individual of their right to opt-in or join following a change of circumstance.

The current legislation means there are five different pieces of information that an employer must give to different types of worker about what is happening to them under automatic enrolment.

The requirements are complicated and can require more than one communication or notice to be given to the same person in quick succession.

This has led to a degree of confusion for the individual and imposes an unnecessary burden on employers because they need to constantly assess their workforce and send different letters to different workers.

Separately, there are also the postponement notices, which enable the employer to exercise their choice to use postponement and issue a notice to defer the automatic enrolment date.