Contractual enrolment into pension saving: some practical issues

Stephen Richards

We’ve looked at some of the ways that contractual enrolment into pension saving is different from auto-enrolment (see Helen Powell’s post, Enrolling into pension saving: do you know your AE from your CE?)  As the regime rolls into action, we are starting to come across areas where the interaction of contractual enrolment with information requirements under the auto-enrolment legislation can create practical problems for employers, and potentially end up baffling members.

Take the example of X Ltd, which decides to postpone auto-enrolment for new joiners by two months and contractually enrol them on the first day of the month after joining, before auto-enrolment applies. Ideally, X Ltd wants to avoid a scenario where employees might give an opt-in notice requiring them to be auto-enrolled in the interim period. X Ltd has up to one month after an eligible employee’s starting date to give the postponement notice, so it decides to delay giving the postponement notice until the day it contractually enrols the employee.

However, in order to validly postpone the employee’s auto-enrolment date, the notice must contain specific information set out in the regulations. This creates a confusing situation for members where they are being told simultaneously that:

1.         their auto-enrolment date has been postponed, that if they meet the eligibility conditions they will be automatically enrolled into a pension scheme on that later date, and that they have the right to opt in before that date; and

2.         they are being enrolled (contractually) into a qualifying pension scheme with effect from an earlier date.

Once the postponed auto-enrolment date comes around a month later, X Ltd has to write to the employee again, to confirm that they are an existing member of a qualifying pension scheme for auto-enrolment purposes (potentially creating further confusion about the start date of membership).

Clearly, it’s all about presentation, and it’s not impossible to get all these messages across in a way employees can understand. It’s just one example of how detailed your preparation for implementing the auto-enrolment regime needs to be.

 Stephen Richards is an associate at Allen & Overy LLP.

Comments published on Pensions Talk do not necessarily reflect the views of Allen & Overy or its clients.

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