23 June 2015
Under sections 3, 5, 7 and 9 of the Pensions (No. 2) Act, employers are obliged to automatically enrol (and re-enrol) workers who satisfy age and earnings criteria into a qualifying workplace pension scheme and make joining arrangements for workers who opt in or apply to join a pension arrangement.
Automatic enrolment and pension saving is not always appropriate. It may impose nugatory work on the employer and in some circumstances could cause an individual to incur a financial penalty.
There are some limited exceptions to the enrolment duty but there is no general power to exclude prescribed types of workers, or workers in prescribed circumstances from the scope of automatic enrolment. However, a prescribed exclusion may carry an increased employer monitoring burden. This section inserts a new section in to the Pensions (No. 2) Act to provide a general power to create exceptions to the employer duties which includes the power to prescribe that a duty is turned into a power. Where such a power was conferred on an employer, it would mean that in prescribed circumstances an employer need not automatically enrol a worker but may choose to do so. The section subsumes the existing power to exclude in section 5(4) of the Pensions (No. 2) Act and Article 268A of the 2005 Order (both of which are repealed) and amends section 10 of the Pensions (No. 2) Act to allow automatic enrolment information to be more appropriately targeted.
Regulations under the new section cannot provide for an employer to be excluded from the automatic enrolment duty on the basis of their size.
The inserted section also includes a power to re-instate the automatic enrolment duty if the circumstances that triggered the exclusion change.