New laws that became law on June 30th 2012 will make it harder for employees to 'induce' existing or prospective employees from opting out of their pension auto-enrolment scheme. Workers can no longer be blackmailed into opting out of a pension scheme in order to be selected for a job or to renew an existing contract.
These new provisions are enforced by the UK Pensions Regulator, which can issue penalties worth up to £50,000 if employers breach these rules. To issue a penalty, the regulator must prove that the employer had a 'sole or main purpose' to discourage the employee from taking auto-enrolment. For example, a one-off payment, job promotion or a wage increase for opting out of the scheme could be fined because it may be considered a detriment. To prevent mistakes, businesses are advised to take approximately 18 months to plan their auto-enrolment procedures to avoid being caught out for any 'unintentional errors'. Companies may need to alter the terms and conditions of their employees' contracts when they change an existing pension plan to ensure they comply with the latest regulations.
Concerns have also been raised that women would suffer the most under these automatic enrolment plans because they are more likely to be in part time employment and earn a lower annual wage. Workers can only join a company pension scheme if their earnings are above £8,105 (the threshold for income tax for under 65s from April 2012 – April 2013), which could affect as may as 5.9 million women who work part-time in the UK.
HM Revenue & Customs has also warned approximately 7,500 people with auto-enrol protection insurance that they could risk losing their cover if they decide not to opt out of their company's automatic enrolment procedure. According to a spokesman for the Government department, people who have enhanced or fixed protection will lose the cover unless they opt out of an additional automatic enrolment plan. Alan Dick, a partner of Forty Two Wealth Management, also warned that losing this insurance is a 'real risk' that could render 'significant consequences' for savers.