Pensions Minister Mike O'Brien says encouraging workers not to save in a workplace pension scheme will become unlawful under proposed changes to the Pensions Bill.
The DWP says it will 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.
O’Brien says the amendment, which will come into force alongside the introduction of automatic enrolment in 2012, will also cover circumstances where employers simply try to force their workers to opt out.
It will leave individuals free to decide if they want to be a member of a workplace pension scheme, he says.
Employers deemed guilty of flouting the new rules could be forced to pay arrears to the policyholder to the amount he or she would have accrued had they remained in the scheme. Alternatively, they could be fined.
“It is very important that people are allowed to meet their retirement expectations by building up the savings they need,” O’Brien says.
“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 pressurise 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, O’Brien adds. It is also proposed there should be a time limit on when complaints can be made or investigations launched by the Regulator. This will provide certainty for employers and workers and discourage the possibility of frivolous claims.
020 7034 2636
Latest news and analysis
Slower revenue and profits
Two questions to consider
IHT mitigation services
What made financial headlines over the weekend?