The Department of Work and Pensions (DWP) has recently used information gathered from employers, advisers, payroll providers and The Pensions Regulator about their automatic enrolment experiences so far.

The information received has led the DWP to make 10 proposals ‘to improve the operation of automatic enrolment for employers and pension scheme providers’. The consultation is open until 7th May 2013 and at present the 10 proposals are not final. Once the consultation period closes, the DWP are keen to make the changes in time for April 2014.

We are providing details for 2 of these proposals which we believe are of most interest:

Proposal 6: Extending the joining window

The problem

Where a worker is assessed as an eligible jobholder, or where a non-eligible jobholder wants to opt in, employers have one month to achieve active membership.

For people with wildly fluctuating or unknown earnings (for example, ‘zero-hour’ workers), the employer may not be able to enrol the member within the one month deadline as they may have to wait until the worker’s pay day to assess them and put them in a pension scheme. This could mean they are breaching the auto enrolment rules and regulations and be subject to action from The Pensions Regulator.

The proposal

To extend the joining window from one month, to six weeks.

What it means

This extension will be welcomed by employers with workers whose earnings won’t be known until they are actually paid. Workers will see no, or little change.

Proposal 8: Excluding certain workers from the automatic enrolment duty

The problem

It is clear that certain workers could suffer a tax charge because they are automatically enrolled. In addition, there are workers for whom automatic enrolment is likely to be unsuitable.

The proposal

To introduce legislation that allows employers to exclude certain workers from automatic enrolment. In particular, those with fixed or enhanced protection, those who have given notice of retirement, those who are serving a period of notice after resigning.

The DWP will consult formally on these proposals to establish if there are any other exclusions that should be made and to make sure that the proposed exclusions do not result in additional administration for employers.

What it means

This should make it easier for employers and will mean that certain workers who arguably should not be automatically enrolled will be exempt. It is however unclear exactly how an employer will be able to identify certain workers – for example those with enhanced or fixed protection – and what processes will be required to monitor excluded workers.

Next Steps

It is clear that although the automatic enrolment is in place, it is still changing and therefore employers must be kept up to date with these changes.

Wingate Benefits Solutions are here to assist you in planning for the new reforms. Should you wish to discuss the above in more detail or any other aspect of your pension scheme please do not hesitate to contact your usual Wingate Benefit Solutions adviser or call us on 0844 406 0027.

Tax and legislation are liable to change. This information is based on WBS’s current understanding of UK law and HM Revenue & Customs practice and legislation we believe may apply in the future. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of the information contained herewith. It is recommended that professional advice is sought prior to entering into any financial arrangement.

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