Government proposes ban on inducements to opt out of schemes

Pensions reform minister Mike O’Brien said employers will be prohibited from offering inducements – such as higher salaries or one-off bonuses – which encourage workers to opt out of joining schemes.

It will also ban employers from forcing people to opt out.

The department for work and pensions said it intends to amend the Bill during the Lords stages. The ban would come into effect with the introduction of auto-enrolment from 2012.

O'Brien said: "Decisions on whether or not to save in a workplace pension need to be taken free of any unfair pressure. That's why we want to prevent employers from trying to pressurise staff or tempt them with 'live for today' inducements into opting out of pension saving.

"Whilst it may seem attractive in the short term to accept an inducement to opt out, when people reach retirement with a lower pension, they're likely to regret taking the easy option."

The Pensions Regulator will enforce the prohibition of inducements, as well as its new responsibilities regarding auto-enrolment into personal accounts and ensuring minimum contributions are paid in.

Where employers "flout the rules" against inducements, the regulator would have the power to require employers to put the worker back in the position they would have been in had they not been induced out of the scheme – by paying any arrears of contributions due, and could impose penalties where employers fail to comply.