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26 June 2014

The Government introduced auto-enrolment into pension schemes in 2012.

Auto-enrolment entails eligible employees being automatically enrolled into their employer’s qualifying pension scheme without any active decision on their part.  An eligible employee is an employee aged between 22 and state pension age and earning above the income tax personal allowance, which is currently £10,000.

If an employee does not elect to opt out of an employer’s pension scheme, this would invalidate ‘Enhanced Protection’ / ‘Fixed Protection’, which could, in due course, result in a significant lifetime allowance tax charge being incurred.  Employers are rolling out auto-enrolment through various ‘staging dates’ according to their employee numbers.  The largest employers have already commenced this process with smaller employers joining over the next 18 months.

On an ongoing basis employers are required to auto-enrol employees every three years and the process is continuous – meaning what?Individuals who currently benefit from the protections detailed above should take care to ensure that they ‘opt out’ of auto-enrolment to preserve the valuable protection and avoid an unnecessary tax charge.  As long as employees opt out within 30 days of auto-enrolment it is considered that the employee has not joined the scheme and the protection is safeguarded.

For further information contact:

Ian McNally

Director, Saunderson House

T: +44 (0)20 7315 6500


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