Pension Reforms FAQs

The following answers have been collated and provided by the CIPP and where quoted other professional bodies and or government bodies.

 Automatic Enrolment

 Q.        One of my clients has a concern re people who have already hit the lifetime allowance. They are on the whole v senior people and will not be at all interested in the fact that the law says they have to be enrolled and then opt out. So could be new people joining the business or existing people. Do you know if there will be any easement around this?

 A.         There will be no exceptions if they qualify under the automatic enrolment criteria they must be automatically enrolled into a qualifying pension scheme.

 Q.        According to a presentation I heard employers must take a pension deduction under automatic enrolment even if an opt out form has been received in time for the payroll; is this true?

 A.         No, providing there is an opt out form and it has been received prior to the payroll actually making a deduction the employer does not have to take a deduction.

 Q.         It has been suggested that the employer can hold onto the pension contributions deducted until after the 1^st month or "opt out" period has elapsed.  The benefit of doing so would mean that the employer could refund the monies taken without incurring a cash flow problem if they choose to opt out.  Can The Pension Regulator confirm the following: 

• a) Can the employer hold onto the contributions once deducted until after the "opt out period has elapsed"?
• b) Does the employer have to hold onto the contributions or can they choose to during the opt out period?

A.         The scheme rules and documents govern the payment of contributions. So there are slight variations depending upon whether the pension scheme is an occupational scheme or contract based scheme (personal pension scheme)

a)   The employer can hold onto the contributions until after the opt out period has elapsed , if they have agreed a change to the due dates for payment with their pension scheme in the case of an occupational pension scheme;

b)   No the employer does not have to hold onto the contributions, unless the pension scheme is a contract based scheme. In this situation, an employer may wish to talk to their provider

NEST

Q.        Is NEST pension reforms or something else?

A.         The National Employment Savings Trust is a pension scheme that has been created to ensure that for those employers who could not secure a company pension option with a commercial pension provider can meet its obligations.  NEST must accept all employers regardless of size, or contributions.

Q.        Assume the scheme is at a "steady state"

• Employee reaches 22^nd birthday and is auto enrolled
• Employee queries deduction on first pay day
• Employee finds out that opt out is available (Karen was saying employer should not promote opt out so may be reluctant to offer advice??)
• Get opt out form from NEST
• Completes and returns to NEST
• NEST notify employer
• Employer action and refunds month one contributions

Questions:

• 1. How will the employee find out the opt out is available?
• 2. How quickly can they get the opt out form?
• 3. How quickly will NEST notify the employer once the form is received?
• 4. If pay day is close to the end of the month and cut off for the next payroll is say 20^th of the month there has to be a very fast turn round of the form (Government departments have never been quick!)
• 5. If the employer does not receive by cut off a month 2 deduction will be taken
• 6. Current rules seems to prevent the refund after month 1 so the contributions are invested until retirement date
• 7. The employee did everything possible to opt out .... and did it on time
• 8. Employer left with employee dispute unable to refund according to the Pensions Regulator (would face penalty no doubt)

Answers: 

• 1. The Opt Out guidance should be included in the required information pack provided to the employee from either the employer or pension provider depending on the procedures of the organisation.
• 2. Will depend on the timescales of the pension provider.
• 3. With NEST the opt out process can be done Online, or by requesting a hard copy form that can be requested online or over the phone, or the individual can opt out over the phone.

If Opt Out online or over the phone, NEST have a responsibility to inform the Employer - process and timescale to be confirmed.

If a hard copy form is used - whether for NEST or any other provider, the completed form must be given to the employer who will then note (for refund purposes) and send on to the scheme provider.

• 4. Agreed it would need to be a fast turn around if the opt out form is to be received in time for no deduction to take place.
• 5. Yes, however the automatic enrolment regulations do allow a 6 week opt out period in circumstances where there has been a delay and is genuine for the employee.
• 6. If the employee does not opt out within their 30 day limit (6 weeks in special circumstances) then if using NEST there can be no refund of contribution. However other pension provider rules will be the same as they are now.
• 7. If the employee did everything required on time then the opt out will apply as the 6 week rule can apply. The non refund after the 6 week period only applies to NEST. Other pension providers may have different rules.
• 8. As long as the employer has carried out their obligations under the automatic enrolment rules the employee will be unable to dispute their actions.

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