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DWP to ban employers from forcing workers to opt out of pension schemes

The Government is set to amend the Pensions Bill to ban employers encouraging or forcing workers to opt out of personal accounts or other workplace pension schemes.

The amendment will prohibit employers from offering inducements, such as higher salaries or bonuses, to encourage workers not to save in a scheme. The ban would come into effect with the introduction of auto-enrolment in 2012.

The Pensions Regulator will be responsible for enforcement of the prohibition on inducements and where employers flout the rules it will 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.

Minister for Pensions Reform Mike 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 Department for Work and Pensions is also proposing a time limit within which complaints have to be made or investigations launched by the Regulator. This aims to provide certainty for employers and workers and discourage the possibility of frivolous claims. It will consult before setting out the final time limits in regulations.

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