Auto Enrolment ‘simplification’ plans unveiled by DWP

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Auto Enrolment ‘simplification’ plans unveiled by DWP

Lifetime news

Posted on: 02/12/2014

The Department for Work and Pensions (DWP) are attempting to make life easier for employers with their Auto Enrolment obligations – by bringing in a number of ‘simplifications’ to the rules.

In a consultation, the DWP set out changes to rules concerning:

  • whether some employees need to be enrolled, (such as those within a protection regime)
  • the information employers need to give employees, and
  • the test given to see if defined benefit schemes can be used for Auto Enrolment

Employees who have pension savings above the annual allowance – and have a protection in place – will no longer have to be enrolled by their employers.

Ats things currently stand, it is the responsibility of employees to realise if they will lose their protection and opt-out of the scheme. If they fail to do so the contributions will be made to them and they will invalidate the protection regime they are part of, facing considerable tax charges.

Some employees are enrolled as soon as they join an employer, rather than the statuary three month wait, and are referred to as ‘contractually-enrolled members’. Currently if they cancel their membership they will be auto enrolled anyway at a later time.

Now the government plans to exempt employers from having to re-enrol them.

Employers will also be exempted from having to enrol workers who have paid ‘winding up lump sums’. If the employer’s scheme is wound up and a winding up lump sums is paid by the scheme to an employee, any subsequent contributions by the employer in the following 12 months will categorise the lump sum as an unauthorised payment and tax charges can apply.

The DWP also plans to reduce the amount of information employers need to give employers.

The new minimum will be:

  • that they understand their right to opt-out and how contributions might be refunded
  • that they can opt-in, if they are not part of the scheme but meet certain requirements
  • understanding whether their enrolment has been postponed for any reason

These reduced requirements lessen the burden on employers to identify each employee’s individual requirements.

The consultation also introduces a simplified test to see if defined benefit schemes are good enough for an employer to use for Auto Enrolment.

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