City Trustees - part of Mattioli Woods



News and Media

22 April 2015

Auto enrolment and pension protection - an update

In a previous Pensions Perspectives (How can I make sure I am not auto enrolled?) we highlighted the risks of being auto enrolled when a member has a protected pension status. However we did confirm that a consultation was underway to explore exemptions from being auto enrolled for clients with pension protection status.

Following the consultation, new regulations were confirmed by the Department of Work and Pensions and from 1 April 2015, where an employer has 'reasonable grounds to believe' (e.g. the jobholder shows them documentary evidence) that a jobholder has pension protection status, i.e. enhanced or fixed protection, an employer may choose not to enrol them on their auto enrolment or re-auto enrolment date. However even if not enrolled, the jobholder still has a right to opt in, although this could then result in the loss of protection status.

The changes are 'permissive', i.e. they are not mandatory, and so employers can continue to follow the 'old' rules indefinitely, with the viewpoint that some employers may still feel that it is easier and more cost effective to auto enrol members with protected status. When a member is auto enrolled, they will need to follow the steps covered in our previous article to ensure protected status is not lost.

These changes will be welcomed by the pension members with protected status. However the onus is still on a member with protected status to notify an employer of their protected position, and to check whether or not the employer intends to take advantage of the new rules. As such, it still remains vital for members with protected status to notify their HR department of their position. In addition, HR departments need to ask the question of protection status for all new employees, as entry into any registered arrangement, including a new group life scheme could invalidate protection status. (If I have protected status why shouldn't I join my new employer's group life scheme?)

As well as exceptions for employees with tax-protected status on their pension savings, exceptions have also been introduced for employees who are in a notice period, employees who have ceased active membership of a qualifying pension scheme within the previous 12 months, and employees who have received a winding up lump sum payment.

 

< Back to News

City Trustees is a trading name of Mattioli Woods plc. For news updates on the Group, please visit our central News & Media on the Group website.