If an employee’s active membership of a pension scheme ends, the employer must re-enrol the individual into an alternative Automatic Enrolment scheme. This process is known as “Immediate Automatic Re-enrolment” and includes deadlines which must be met. As a lesser known aspect of Auto Enrolment, it is worth understanding the four circumstances that can trigger Immediate Automatic Enrolment and how it can affect you:
1. The company pension ceases to be a Qualifying Scheme
If a pension scheme is closed then the members of the closed scheme would need to be immediately and automatically re-enrolled into a new scheme. It doesn’t have to be as dramatic as a scheme closure; if the scheme design changes so that the scheme is no longer a qualifying scheme (say, the contribution rates go below the statutory minimum) then the members of the scheme will have to be re-enrolled. The employer must assess the employees the day after active membership has ceased, which will be the Automatic Re-enrolment date.
2. Employees cease to be ordinarily working in the UK
Generally, employees who leave the UK are no longer eligible for Automatic Enrolment. However, Immediate Re-enrolment would apply on their return to the UK assuming they were again assessed to be eligible jobholders. This requires the assessment to take place on the first day the employee starts working in the UK again.
3. The individual ceased to have Qualifying Earnings
Individuals may be part of schemes where, if earnings fall below a prescribed amount, they are removed from the pension scheme and contributions stop. In this situation the employer would need to monitor the member and if their salary were to rise above the minimum the individual would immediately be re-enrolled.
4. Notice of termination of employment is withdrawn
This situation occurs when the employer or employee change their mind about the employee leaving the company. The individual is then immediately re-enrolled and if they meet the eligibility criteria the re-enrolment date is the date on which the notice of termination is withdrawn. If the worker is not eligible the automatic re-enrolment date is deferred until the date on which the criteria are met.
There are situations where Immediate Automatic Re-enrolment does not apply. If an employer moves an employee from one eligible scheme to another, without a break in contributions, then automatic re-enrolment is not required. It also does not apply when:
- A worker has been paid a winding-up lump sum in the last year and then leaves employment but subsequently re-joins the same employer
- Termination notice
- An individual has Primary, Enhanced or Fixed Protection
Immediate Automatic Re-enrolment is a relatively obscure part of Automatic Enrolment legislation but it can still be a useful tool for employers. It can be used when an employer decides to move from one Qualifying Scheme to another. However, employers should be aware that other legal requirements must still be met e.g. contractual obligations must still be fulfilled.
If you believe Immediate Automatic Re-enrolment affects you (either as an employer or employee) or are simply interested in knowing more, please contact your Courtiers adviser and they will be happy to help.
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