Employers will not have to auto-enrol employees in certain circumstances because of changes to government legislation.
As a result, from April 2015, the following types of employee will no longer need to be auto-enrolled:
- individuals who are leaving employment
- those who cancel scheme membership before auto-enrolment
- employees whose existing pension savings have tax-protected status.
The changes were first published in March 2015 in a response to the consultation ‘Technical Changes to Automatic Enrolment’.
1. Employees Leaving Employment
The auto-enrolment process can be stopped for employees who intend to leave employment and are in their notice period when the employer’s auto-enrolment duties begin.
The employee will not be able to opt-in or join the pension scheme unless their notice is withdrawn.
2. Membership Cancellation
Currently, eligible jobholders need to be auto-enrolled even if they cancel their pension scheme membership. The new rules will give employers the choice over whether they enrol an employee who cancels their membership. This must be done within 12 months of their cancellation.
Workers who left a scheme more than 12 months before the auto-enrolment date will have to be enrolled.
3. Tax-Protected Savings
Some employees with pension savings above the lifetime allowance (currently £1.25 million) are protected against tax charges. Enhanced and fixed protections may be lost if the employee is auto-enrolled, and the only way to avoid this under current rules is for the employee to opt-out.
The changes will allow employees to become exempt from auto-enrolment if they provide evidence of having tax-protected status. However, the employer will retain the power to auto-enrol workers regardless of tax-protected status if it is more cost-effective to do so.