Share this content

Auto enrolment and personal pension requests

Auto enrolment and personal pension requests

Didn't find your answer?

I have a client with a company who is in the process on taking on additional employees. We have an auto enrolment scheme in place for the existing employees however a few of the new employees want to opt out and recieve the cash equivilent as part of their salary so that they can make pension contributions into the pension scheme of their choice. I would expect this will need to be included within their employee T&C  but am aware that the employer cannot have any influence over the employees decision whether to opt in/opt out and having this in their contract could be seen as involvement by the company/director in the decision.

Wondering how others have dealt with this as its not the first time the question has been raised by new employees.







Replies (8)

Please login or register to join the discussion.

By Paul Crowley
22nd Apr 2021 11:22

If it is put in writing BEFORE opt out I would consider there to be a risk
The point of auto is everyone gets a pension
Do not believe loads of employees want their own better pension
Do believe employees want more spending money 8%
Employers contribution really is trivial 3%
I would not reward a spendthrift

I would contribute 3% to employees pension if employee opted out and set up a pension evidenced at 5% contributions by employee

Annually renewable on evidence of employee making contributions

Thanks (1)
Replying to Paul Crowley:
By Avant-Garde54
22nd Apr 2021 11:38

Thanks for reply. One of the employees has stated his previous employer paid 3% into his personal pension and this is what he wants ideally. We have told our client to avoid this as if they offer this as a policy they could end up having to set up contributions to a different pension schemes for 50 employees which would be very time consuming and therefore to insist on the one company pension scheme. Some employees are adamant they only want contributions into their own pension schemes that they have invested into for several years and if it cant be paid directly they would like it paid via salary.

Thanks (0)
By Wanderer
22nd Apr 2021 11:32

Wouldn't get involved.
Would get to be an admin headache, let alone possible inference that employer had influenced employee decision to opt out.
Employees either stay in employer's AE pension or opt out.
No cash equivalent offered.
No offer to contribute to various other pension schemes.

Thanks (2)
Replying to Wanderer:
By Hugo Fair
22nd Apr 2021 12:07

+1 (on all 4 points).

Of course an employee can choose what to do with their net pay (such as paying some it into a pension scheme of their choice - and then sorting out the tax position depending on the type of scheme selected).

But there's no need for ER to take on the admin burden ... would they agree to make payments to various credit cards on behalf of individual employees?
And stay well away from changes to employment T&Cs unless employment lawyers are employed to do this (and only if they are well versed in TPR regs) ... even a 'cash equivalent' could be interpreted as an inducement to opt-out.

Thanks (1)
Replying to Wanderer:
By Moonbeam
22nd Apr 2021 12:18

Agree with Wanderer 100%. I suspect employer has verbally promised something that would not be legal anyway without checking viability first.

Thanks (0)
22nd Apr 2021 12:26

Can the employees not subsequently transfer any funds that go into the workplace pension into a SIPP/similar prior to their retirement?

I personally would not entertain the additional complexity of agreeing to make contributions to myriad schemes but there is also nothing to stop the employer setting up an AE compliant company scheme (albeit some providers will not entertain if only a few staff involved/low contributions) which might be a better solution.

Thanks (0)
By Mike Nicholas
22nd Apr 2021 12:42

"...a few of the new employees want to opt out and recieve the cash equivilent as part of their salary"

'Agreeing' to this would surely mean the employer seeks to induce the employees to opt out.
And even if it were not such an inducement, what will the employer do when re-enrolment comes round and the employee says yes I will now enrol?

Thanks (0)
By ohwhatnow
22nd Apr 2021 16:33

we've had this, and after looking at it decided that it was going to be a "NO".
Too much admin if it was then having to be made available to all staff - certainly staff can ask, but it is up to the employer as to what if offered across the table.
we took a similar stance to employees who didn't want to join in on an arranged Xmas party a few years ago , but argued that they should be able to take an equivalent cash amount to what would have been spent on them ?

Thanks (0)
Share this content