Encouraging Or Forcing Workers Not to Save in a Workplace Pension Will Become Unlawful

Encouraging or forcing workers not to save in a workplace pension will become unlawful under proposed changes to the Pensions Bill, Minister for Pensions Reform Mike O’Brien said today.

The DWP intends to amend the current Pensions Bill during the Lords stages to prohibit employers from offering “inducements” - such as higher salaries or one-off bonuses - which encourage workers to opt out.

The amendment will also cover circumstances where employers simply try to force their workers to opt out. This will leave individuals free to decide if they want to be a member of a workplace pension scheme. The ban would come into effect with the introduction of auto-enrollment from 2012.

Minister for Pensions Reform Mike O’Brien said:

“It is very important that people are allowed to meet their retirement expectations by building up the savings they need. Decisions on whether or not to save in a workplace pension need to be taken free of any unfair pressure. That’s why we want to prevent employers from trying to pressurize staff or tempt them with ‘live for today’ inducements into opting out of pension saving.

“Whilst it may seem attractive in the short term to accept an inducement to opt out, when people reach retirement with a lower pension, they’re likely to regret taking the easy option.”

The Pensions Regulator will be responsible for enforcement of the prohibition on inducements - as well as its new key role of ensuring that employers fulfill their duties under the Bill, including the requirements to automatically enroll staff into a good workplace pension scheme, and provide the employer minimum contribution of three per cent.

It is also proposed that there should be a time limit within which complaints have to be made or investigations launched by the Regulator. This will provide certainty for employers and workers and discourage the possibility of frivolous claims. There are differing views among stakeholders on how long that period of time should be. The DWP therefore wishes to consult before setting out the final time limits in regulations.

Where employers flout the rules against inducements, the Pensions Regulator would have the power to require employers to put the worker back in the position they would have been in had they not been induced out of the scheme, by paying any arrears of contributions due, and could ultimately impose penalties where employers fail to comply.

Source: Department for Work And Pensions

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