DWP committed to postponement for DB schemes only

The Department for Work and Pension has accepted that the way the Pensions Act is currently drafted does not express its policy intention on postponement.

The DWP says it is considering its options and remains committed to transitional arrangements only applying to employers automatically enrolling staff into DB schemes.

But the department stopped short of saying it will enact emergency legislation to correct the drafting error.

The statement from the DWP follows the revelation, unearthed by LCP, that three thousand employers could avoid having to automatically enrol 4 million staff into pension schemes next year because of a loophole in the Pensions Act.

The problem stems around employers offering hybrid schemes that offer both defined benefit and defined contribution schemes. Because DB schemes are typically so much more generous than DC ones, the automatic enrolment regulations allow employers offering them to postpone auto-enrolment until 2017.

The Pensions Act also allows schemes that are hybrids offering employees both DB and DC to defer automatically enrolling staff until 2017.

A spokesperson for the Department for Work and Pensions says: “We are grateful to LCP for bringing this to our attention and are looking at the issue. Our intention remains that transitional arrangements only apply to employers who automatically enrol their existing workforce into the hybrid or defined benefit element of their pension scheme.

“In addition, all new members of staff joining these firms after their staging date will be automatically enrolled – and existing staff can still choose to opt in.”