It became apparent quite early on that automatic enrolment would be inappropriate for employees in certain situations. Following a government consultation aimed at improving the Automatic Enrolment process, it was clear there was a case for excluding employees from Auto Enrolment who:
- are leaving the employer
- have recently cancelled membership of a pension scheme
- have tax protected status on their existing pension savings
As a result from 1st April 2015 the Auto Enrolment legislation was changed so that an employer is no longer required to enrol these employees even though they may be eligible. Further detail is provided below:
Employees leaving employment
If an employee is on notice to leave employment an employer can choose whether or not to enrol that employee at any time up to 6 weeks after the requirement to do so arises; the process can also be stopped if notice is given after an employee becomes eligible but before they have been auto enrolled.
If notice is withdrawn for any reason, the Auto Enrolment requirements will need to be fulfilled effective from the date of the withdrawal.
Employees who have recently cancelled membership of a pension scheme
Some employees may have joined the employer’s pension scheme when they first started work and subsequently cancelled their membership, only to be re-enrolled again once the employer reached it Auto Enrolment ‘Staging Date’.
Now, if an employee cancels their company pension scheme membership within 12 months of the date they are to be auto enrolled, the employer does not need to enrol that employee until its next re-enrolment date.
Individuals with tax protected status
An employee may have claimed a pension-related protected tax status on their existing pension savings which requires no future pension contributions to be made; Automatic Enrolment therefore puts these arrangements at risk.
Previously the only option available to these employees was to opt out, but if that wasn’t done within the statutory time limit, it could have lead to their protected pension status being lost, which could in turn give rise to significant tax charges.
The Government has now removed the requirement for these employees to be automatically enrolled, so preventing the risk of them losing their valuable protected pension status.
If you would like any further information on these changes and how they may affect you or on Auto Enrolment in general please contact us on 0844 406 0027