Inducing employee opt-outs will be unlawful

Inducing employee opt-outs will be unlawful

The Government has changed the Pensions Bill to prevent employers from encouraging or pressurising employees to opt out of their pension schemes.   The new law will apply from 2012, when auto-enrolment comes into effect.

Employers who do not comply with the new law may have to reinstate affected workers by paying arrears of contributions due.  They may also be fined.  The Pensions Regulator will police the new law.

Under auto-enrolment, employers must contribute at least 3 per cent of pay to a personal pension scheme unless the worker decides to opt out.  The change will mean that it will be unlawful for employers to offer higher salaries or bonuses in return for employees agreeing not to join or opt out of pension schemes.  Employers who engage large numbers of casual workers will be most affected by these changes.   The ban may also impact on flexible benefit schemes and the employees' ability to draw cash from their flexi account instead of putting it towards their pension.  It seems unlikely the change will prevent employers from carrying out enhanced transfer value exercises to reduce defined benefit scheme liabilities.

Contacts

If you would like further information on this subject please get in touch with your usual contact or:

Alan Jarvis,
Partner, Employment & Pensions T: +44 (0)20 7246 7038

Elmer Doonan,
Partner, Employment & Pensions T: +44 (0)20 7246 7151

Andrew Patten,
Partner, Employment & Pensions T: +44 (0)20 7246 7306

Karen Prince,
Senior Professional Support Lawyer, Employment & Pensions T: +44 (0)20 7246 7471