Auto-enrolment – DWP’s response to exemption of certain categories of workers

Print publication


The Department for Work and Pensions (DWP) has recently published its report in response to the consultation on the exemption of certain categories of workers who should not be included in the scope of auto-enrolment.

The proposed exemptions were set out in a consultation paper (published March 2013), alongside other proposals to simplify technical aspects of the auto-enrolment procedure, but were not included in the final amending regulations issued in October 2013.

Having considered the responses to the consultation, the DWP has now published a report which highlights the areas which it believes have a strong case for an exemption from auto-enrolment duties for certain employees.

The categories of workers that the DWP considers should be covered by the exemption include:

  • employees who have tax protected status for existing savings
  • employees who are about to leave employment
  • employees who have given their employer notice of their immediate retirement
  • employees who have recently cancelled membership having been contractually enrolled.

Employees who have tax protected status for existing savings
The Government has commented that there is a strong argument for exemption from auto-enrolment and re-enrolment for employees with some form of tax protected status for pension savings, for example individuals with enhanced or fixed protection. However, respondents have pointed out that there may be practical issues with such an exclusion since it would be hard for an employer to know which employee has tax protection.

It has been suggested that one solution to this issue would be to provide an exception where this would only apply when the employer is aware of such an individual’s tax status. How this is to be implemented is still to be seen.

Employees leaving employment
Respondents on the whole have agreed that employers should not be required to automatically enrol an employee who has since handed in his/her notice or is being dismissed and is working their notice period, where this period of notice spans their auto-enrolment or re-enrolment date.

The Government believes that there is a good case for excluding ‘leavers’. However, it does need to further consider practical problems such as payroll systems not being set up to record the date someone hands in their notice. The Government wants to ensure that any provisions are straightforward to put in place.

It is important to note this exception will not cover people at risk of redundancy.

Employees who have given notice of retirement
The consultation posed questions about whether auto-enrolment need apply to a scheme member who has handed in his/her notice to retire. Some respondents argued that given that such employees could still build up a small fund, such employees should therefore not be excluded. Other respondents argued the case that the exception should apply to affected employees who have reached maximum accrual in their employer’s scheme or who are already receiving benefits from the scheme or DB benefits from previous employment.

The Government’s considers that there is a case for excluding employees who have given notice of their intention to retire. It will develop proposals to exclude such employees where their retirement notice spans the auto enrolment and re-enrolment date. The Government believes the other scenarios raised were either (a) already covered by existing provisions or (b) the best course of action would be for the affected employee to opt-out.

Employees who have recently cancelled membership having been contractually enrolled.
Respondents highlighted that employees who opt-out of membership on a contractual basis should not be automatically enrolled shortly after. Respondents commented that this scenario is difficult to explain to workers, and provides an unnecessary administrative burden for all involved.

It seems the Government is in agreement with the above and is looking to address this issue as soon as possible in the next draft regulations.

Next Steps
The Government will publish its final proposals to the consultation as well as draft regulations in due course. These regulations will be made under the regulation-making power, which is contained in the current Pensions Bill, which is working its way through Parliament at the time of this newsletter.