TPR to monitor 'suspicious' auto-enrolment opt outs

The Pensions Regulator (TPR) said it will monitor "suspiciously high" opt-out rates under auto-enrolment after MPs suggested some employers may force workers to leave the scheme.

Malcolm Wicks, Labour MP for Croydon, said TPR will have no way of knowing if employees are forced to opt out or encouraged to become self-employed.

By 2017, employers must automatically enroll their employees into a pension scheme. Employees will contribute 4%, employers 3% and there be 1% tax relief.

In a committee debate on the Pensions Bill, MPs questioned how TPR will ensure employers do not coerce staff into opting out of pensions.

Pensions minister Steve Webb (pictured) said TPR "will focus its resources on cases where opt-out rates look suspiciously high."

Webb said TPR would be able to cross reference PAYE records with auto-enrolment records to see where employees opt out.

"TPR will not be able to tell between genuine opting out and [coerced] opting out. That is where an individual who feels aggrieved will be able to report it," he said.

"We do not want to create massive burdens of reporting, but we will be reporting back to the House on the progress of auto-enrolment," he added.

Chris Evans, Labour MP for Islwyn, said: "How do we ensure companies do not encourage employees to become self-employed to avoid auto-enrolment?"

Webb said HMRC and the Department for Work and Pensions (DWP) are already investigating the practice as employers already use it to avoid paying national insurance.

However, Ian Neale, director of consultancy Aries Pensions, said TPR will not be able to cope with auto-enrolment and warned this will be a "huge problem".

"Employers used to have to designate a stakeholder, but the Occupational Pensions Regulatory Authority (OPRA) did not have the resources to enforce this," he said.

"Now we have a stronger regulator, but TPR still is not going to have the resources; there is a limit to how many hours can be spent on this."