The plan is to make it easier for both employers to manage reward schemes and for employees to avoid potential tax pitfalls associated with being automatically enrolled on pensions.
Under the new amendments, certain categories of employee will be exempt from being enrolled automatically. These include workers who have given notice of leaving employment and those who have tax-protected status for existing pension savings.
The latter category is particularly important. If someone with tax-protected status is enrolled automatically and makes a payment into a company pension scheme it could invalidate their agreement, leaving them with a six-figure tax bill.
A spokesman for DWP said: “The next step is to develop proposals for workable exceptions that provide real value for both individuals and employers. We will consider how to accommodate circumstances where an employer may not know about the person’s individual circumstances."
Clare Abrahams, head of auto-enrolment at Lorica Employee Benefits, is sceptical about the announcement. She told HR magazine: "The problem is this isn't actually saying anything new. They are saying what could happen, but nowhere have they said what they're going to do or given any real plan of action."
Abrahams claimed there were particular issues around leavers. "They keep referring back to the fact that employees always have the option to opt out, but have not addressed the practicalities behind opt-out where an individual no longer works for a company," she said.
"How will they action opt-out? Will they really understand that they still need to opt out from a pension scheme of a company that they no longer work for? How will refunds be processed to employees who are no longer on the payroll?"
Others are more positive about the changes. Melissa Goddard, director of pension solutions at Ceridian UK, told HR magazine: "We've been campaigning for simplification of these rules for a long time. The main issue is around employers not having all the information around workers' current pension arrangement. The Government is taking a sensible approach to some very big challenges around auto-enrolment."
