Employers that offer pensions through salary sacrifice or as part of a flexible benefits plan must know how to manage these in the light of auto-enrolment.
Last month, The Pensions Regulator (TPR) issued updated guidance on the issue. This said that an employee who is automatically enrolled into a pension scheme cannot be required to commit to a salary sacrifice arrangement by the auto-enrolment date.
But an employer can put salary sacrifice in place ahead of the enrolment date or use postponement, of up to three months, to allow extra time to make these arrangements. Claire Carey, partner at pensions law firm Sackers, said: “There are certain provisions in the legislation that prevent an employer trying to put obstacles or barriers between a member and auto-enrolment, and indeed offering them an inducement not to join.
“One of the key barriers to joining is if [the employee] has to consent to something when they join. Auto-enrolment is not a barrier to salary sacrifice, but the key is to make sure to do it at the right time and in the right way.”
Employers can continue to include pensions provision within flex, providing they comply with auto-enrolment legislation on contributions. The TPR guidance said: “Enrolment must be able to take place at the minimum contribution level (a total of 8%) even if the jobholder has not made any specific election regarding flexible benefits options.”
Mark Futcher, partner at Barnett Waddingham, said: “It will increase the administrative burden. Employers with salary sacrifice and flex linked to pensions must review their offering.”
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