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AE - Employee wants to opt down?

Is there such a thing?

I have a client whose employee wants to decrease their contributions when the increases come into effect in April. My question is, would the employer still need to contribute their employer contribution? Is this an option for employees? I’m sure it’ll come up again with other clients and I can’t find anything on TPR’s website about this. Help!


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20th Feb 2018 15:38

You can't opt opt down. It would defeat the purpose - everyone would drop down. The rates are the legal rates. You can adjust rates to suit yourself as an employer over and above the minimum as can the employee (with the employers approval). An employer is not bound to increase his portion because an employee may want it done. Of course the employee can opt out with no influence from the employer.
So the answer to your question is rather immaterial as its a no choice answer.

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20th Feb 2018 15:55

I disagree.

There are minimum levels specified for the total contribution and for the employer's, but not for the employee's contribution. From April, the minimum contributions are 5% in total with 2% from the employer. If the employer were prepared to contribute 4%, the employee would only need to contribute 1% to meet the total of 5%.

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20th Feb 2018 15:59

Yes - if the employer will take up the slack and the total contribution is at least 5%.

Which more than often won't be the case.

The employer is much more likely to say "Hurrah! That saves me money too."

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20th Feb 2018 16:49

Opting down is a genuine 'thing'. It means that the employee opts to pay a reduced contribution (as an alternative to leaving the pension altogether.)

If they do this, they are no longer members of a "qualifying scheme" for auto-enrolment purposes, because the minimum contribution isn't being made. This in turn means that they'll have to be auto-enrolled into a qualifying scheme again at the next cyclic re-enrolment exercise.

Not all pension schemes allow this approach (I don't know which do, you'd have to ask them!), and even if the scheme allows it, there's no obligation on employers to allow their workers to do it.

If an employer does allow this, they're then under no obligation to make any contribution at all (because it's not a qualifying scheme, so the minimum contribution rules don't apply).

The usual caveats apply regarding employers "encouraging" staff to take this route - anything which could be seen as encouraging workers to leave a qualifying scheme is forbidden!

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to neiltonks
20th Feb 2018 17:20 other words there's no such thing as "opting down" for AE, because as other posters have said, the minimum AE contributions must be made and unless the employer makes up any shortfall by the employee then it's not AE. Or am I missing something?

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to neiltonks
20th Feb 2018 17:31

Whilst not disagreeing with anything Neil says, I took the general thrust of the OP to be that the client wanted to pay nothing, whilst expecting the employer to keep chipping in the full whack.

Unfortunately, that's not the deal on offer.

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to lionofludesch
20th Feb 2018 23:30

Well, the employer could continue to contribute if they chose to, but I don't see why they would if the employee has chosen to pay nothing! The employer certainly has no obligation to pay anything.

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to neiltonks
21st Feb 2018 12:12

Wouldn't a clearer way of describing "opting down" be to say "opting out and then voluntarily contributing outside of AE". Otherwise, the employer is potentially in breach of AE rules if they don;t pick up the shortfall.

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21st Feb 2018 11:11

Thank you for all the comments.
My client's employee would like to continue paying the 1% and not increase their contribution in April. So my client wants to know if they need to pay the difference or nothing at all if the employee ‘opts down’.
It would make sense that if an employee 'opts down' they wouldn’t be qualifying under AE. It's also quite possible some pension providers won’t allow for this as it wouldn’t be worth their while and it may cause problems with pension file submission.

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to Counting numbers
21st Feb 2018 11:28

watching thread with interest - anyone know if Nest supports this?
not heard of this at all before now - surely the employer would have to "offer" this to all employees, if taking up the shortfall, - would be a benefit if just one employee?
I'm gritting my teeth when April comes along - have reminded all staff of the increases, but bracing myself for the backlash when the rates increase!

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to ohwhatnow
21st Feb 2018 12:10

The employer need - indeed must - do nothing. Getting involved with influencing employees one way or the other is the road to disaster.

I'd just tell the employee that he can keep paying his 1% - if the scheme allows it - but the employer won't be bothering.

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14th Mar 2018 11:26

Shall we stop with the phrase "opt down" which doesn't exist.
The employee can choose to opt out and make voluntary contributions to which the employer does not have to match or even contribute.

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