1 July 2008

Under proposed changes to the Pensions Bill, Mike O’Brien, Minister for Pensions Reform, hopes to make it illegal for employers to encourage their workers to opt-out of a workplace pension scheme.

The amendment aims to prohibit employers from offering inducements such as higher salaries or one-off bonuses instead of paying into a pension. It is claimed that the move, which would come into effect in 2012 along with Personal Accounts and auto-enrolment, will give individuals more autonomy when deciding whether or not they want to be a part of a workplace system.

It will be the job of the Pensions Regulator (TPR) to enforce the new rule should it become law along with ensuring that employers fulfil their duty under the Bill to automatically enrol staff into a workplace pension scheme and provide the obligatory three per cent minimum employer contribution. Where rules are ignored, TPR would be able to put the worker back in the financial position they would have been in had they not been induced out of the scheme, by paying any arrears of contributions due, and could ultimately enforce penalties where employers fail to comply.

O’Brien commented: “Decisions on whether or not to save in a workplace pension need to be taken free of any unfair pressure. That’s why we want to prevent employers from trying to pressurise staff or tempt them with ‘live for today’ inducements into opting out of pension saving.”

However, John Branford of actuarial and pensions consultancy HamishWilson disagreed, stating: “There will undoubtedly be situations where conscientious and well-meaning employers consider it appropriate to alert workers to the fact that they may lose out of means-tested state benefits if they take up the right to accumulate retirement savings through the Personal Accounts system. It would be scandalous if such employers felt prohibited from doing right by their workers for fear of being penalised by the Pensions Regulator.”

- Pensions Age July 2008