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Govt sets out auto-enrolment simplification plans

The Government plans to introduce a series of automatic enrolment simplifications in a bid to reduce the administrative burden on employers.

In March the Department for Work and Pensions consulted on a series of technical amendments to auto-enrolment that would allow employers to exclude certain employees from the reforms.

People who have reached the lifetime allowance and have fixed or enhanced protection, for example, could face six-figure tax bills if they do not opt-out of their company pension scheme.

This is because additional pension contributions would void any protections, leaving the saver liable to a 55 per cent tax charge on savings above the lifetime allowance.

In its response to the consultation, the DWP says there is a “strong case” not to auto-enrol workers who have tax protected status for existing pension savings, are on the brink of leaving employment, have given notice of imminent retirement or have recently cancelled membership after being contract joined.

The DWP says: “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.

“We shall bring forward final proposals, with a draft statutory instrument for consultation in due course.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “This would require significant system changes for payroll providers because they would need to integrate extra eligibility criteria.

“It also seems late in the day to be doing this. By the time these changes are in place auto-enrolment will have already happened for millions of people.”

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