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DWP to close auto-enrolment loophole

DWP to close auto-enrolment loophole

The Department for Work and Pensions (DWP) has said it will close a 'loophole' which could delay auto-enrolment for up to four million employees who are offered a mix of defined benefit and defined contribution pensions.

The DWP has confirmed it will make changes to auto-enrolment legislation which currently allow any hybrid defined benefit (DB) and defined contribution (DC) scheme, which is eligible for auto-enrolment, to defer auto-enrolment until 1 October 2017 for those of its workforce who had a pre-staging date right to join the scheme but chose not to do so.

This rule was only intended to apply to hybrid schemes that would not benefit from the phasing in of minimum contributions, because they already offer new entrants the better of the DC or DB arrangement.

An amendment to the Pensions Act 2008 will ensure only employers offering DB to a jobholder will be able to defer.

Under the change, all eligible jobholders who do not have access to DB must be automatically enrolled from their staging date.

Pensions minister Steve Webb (pictured) said: 'Automatic enrolment is the most significant reform to pensions for a 100 years and will help up to 11 million people without a pension to start saving into one. It’s vital that firms comply with the spirit as well as the letter of the law. I’m sending out a clear message that all workers should be allowed to save for their retirement as soon as possible.'

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