Employers will be prohibited from taking any action intended to make an employee opt out of an auto-enrolment scheme from 1 July 2012.
While employer staging dates are spread over several years depending the number of workers, the laws relating to inducements and safeguards affect all employers from 1 July 2012. An inducement is any action whose 'sole or main purpose' is to cause a worker to opt out (without joining another suitable scheme).
Employers or their representatives cannot imply that a job application is more likely to be successful if the individual opts out and the regulator will take action where we see evidence of inducement. This will include an initial fine of up to £400 followed by escalating penalties of up to £10,000 a day for the largest employers.
Employers can find out about the new duties and when they apply with the regulator's online interactive tools at www.tpr.gov.uk/employers/tools.
Employer compliance policy manager at The Pensions Regulator, Toby Christie, said: "Automatic enrolment will make saving for retirement the default position for millions of people in the UK. Individuals will be able to opt-out of an automatic enrolment scheme, but the decision to stop saving for retirement is a major step and should be the individual's own. From 1 July 2012, employers will be banned from offering incentives to their workers to opt out. This will include refusing to employ someone because they want to join the company pension scheme.
"The regulator will take enforcement action where we find employers have taken any action to induce employees to opt-out - even if this action is undertaken via an adviser or consultant on the employer's behalf.
"An action is considered an inducement if the 'sole or main purpose' of the particular action is to persuade or cause an individual to opt out of or leave their pension scheme, without becoming an active member of another scheme.
"During the recruitment process - when advertising a role, at interview, or providing information about employment - the employer or their representative must not ask any question, or make any written or verbal statement that either states or implies that a job applicant's success could depend on whether or not they opt out of an auto-enrolment scheme. This is known as prohibited recruitment conduct."
Example of a case that appears to be a clear cut 'inducement'
The employer tells a worker that if they opt out of, or leave, their pension scheme, they will receive any of the following:
- an extended or renewed contract in the case of a short-term worker;
- a one-off payment;
- a higher salary level;
- a promotion.
