Getting on the starting blocks

Good news from Europe. The European Commission has given its blessing for employers to automatically enrol their workforce into contract-based pensions, such as group personal pensions.

As you may remember, the Department for Work and Pensions’ (DWP) view was that European legislation doesn’t allow automatic enrolment into GPPs. This was going to create serious problems once employers’ new pension responsibilities kicked in in 2012, and would have meant employers wouldn’t have been able to offer GPPs as an alternative to personal accounts.

However, after big discussions in Brussels, the European Commission has decreed that automatic-enrolment into GPPs from 2012 will be consistent with European law. This is fantastic news. Some three million people in GPPs can rest easier now this major roadblock in the implementation of UK pension reform has been removed. Without it, employers could have been forced to shut their GPPs, leaving millions worse off in retirement.

It does however beg the question of why is automatic enrolment into GPPs not possible today? The new legislation being debated in the House of Lords does enshrine the employer contribution requirement from 2012. But if we are serious about helping people save for retirement, then giving employers the flexibility to enrol their workforce sooner will help them manage their cash flow and so be able to offer good pension provision to their workforce earlier.

One way of doing this is through streamlined joining. Another is through automatic enrolment. Employers should at least have the flexibility to pick the right option for their schemes.

Rachel Vahey
Head of Pensions Development

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Important note

This blog provides the views of our industry lobbying team. The views are the opinion of the person writing the entry of the blog and don't necessarily represent the views of AEGON in the UK. They are based on their interpretation of industry developments and their current understanding of UK proposed and actual legislation, and should not be interpreted as recommendations or advice.