Proposed DWP regulations on auto-enrolment opt-outs from Personal Account pension schemes are causing concern over the burden of wasteful box-ticking that will be placed on employers.

The draft regulations issued by the Department for Work and Pensions covering the auto-enrolment process have been diplomatically viewed as 'not straightforward' by consultant actuaries, First Actuarial.

Alan Smith, director at First Actuarial, said: "It is not surprising that the personal account charge can be kept low as a large part of the administrative burden is being placed on employers."

Under the proposals, from 2012, eligible employees must be automatically enrolled in the pension scheme whether they intend to stay in or opt out. Employers will not be allowed to provide opt-out forms which must be obtained by the employee from the scheme administrator. They will, however, need to process the form to amend the payroll before returning it to the administrator. Contribution refunds must be paid to the employee before they and employer refunds are claimed back from the administrator.

Then, after three years, the whole process begins again when the employer must automatically re-enrol the employee, regardless of the employee's expressed intentions. The onus of keeping track of when employees must be re-auto-enrolled is placed on the employer.

Smith added: "Whilst we support the aim of improving work based pension provision we believe this can be achieved in a much more efficient manner than proposed in these draft regulations."

Pensions advisory firm HamishWilson is particularly concerned about the effect on the small employer. Gary Tansley, Senior Consultant at HamishWilson, explained: "The automatic enrolment process proposed by the DWP contains rigid time limits that are simply unfeasible for most small organisations.

"Larger employers will have fully resourced and experienced payroll departments and will be well placed to cope with the tight time limits. Smaller organisations, however, who may rely on a single employee to attend to payroll matters on a part-time basis or perhaps outsource all payroll to a third party, will find it almost impossible to comply."

- Pensions Age June 2009

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