News analysis: Exceptions to auto-enrolment regulations due next year will bring more flexibility to schemes, but may be too late to help those already enrolled.
Changes to a clause within the pensions bill would provide power to remove an employer's duty to auto-enrol specific descriptions or categories of jobholders that currently fall within the scope of the reform.
The government stated it had been "presented with evidence about situations in which being automatically enrolled is likely to cause detriment to some jobholders".
According to the Department for Work and Pension’s response to its consultation on technical changes to auto-enrolment, workers protected from tax charges under HM Revenue & Customs enhanced or fixed protection provisions could be exempt.
At the moment, if a worker wants protection they have to opt out, or face significant tax charges. But this is set to change, the briefing paper noted.
Other exemptions could include workers that are set to be auto-enrolled during their notice period, or where members have given notice of retirement and have stopped making contributions but have not yet purchased an annuity. "There is a case to re-examine the appropriateness of the employer duty in some, very carefully specified, circumstances," the briefing note stated.
A spokesperson for the DWP said: “Rather than keeping something that was inflexible, it is about making it better. We are learning from what has already happened. We don’t want to stick to something that isn’t working.”
Pension professionals have welcomed the changes, although some have said they should have been implemented earlier. "I am disappointed that these common-sense tweaks to the auto-enrolment regulations are coming out so late in the day,” said Anne-Marie Winton, partner at law firm Nabarro.
She said many employers and trustees, particularly of defined contribution schemes, would have had to deal with accidentally enrolling senior employees and potentially losing valuable tax protections if they did not opt out in time.
“Schemes need flexibility to deal with daft situations – however, unless and until the regulations do this, then there is no choice but to auto-enrol people who may get no benefit from this," Winton added.
Danny Cox, head of financial planning at pension provider Hargreaves Lansdown, said: “Giving the individual or the scheme the option to leave certain categories of people out of auto-enrolment is a sensible move.”
Cox added not everyone who opted for a fixed protection would be sufficiently engaged with their pension to go through the process of auto-enrolment and then opting out, and stressed the exceptions should not be used to absolve small companies of their responsibilities.
