Protected pension pots and auto enrolment
You should advise your auto enrolment (AE) administrator if your pension pot is protected to avoid seriously damaging your pension planning.
Your AE administrator is responsible for assessing the workforce to identify who should be auto enrolled into a qualifying scheme. They will also make sure the right contributions are made by the right people at the right time.
For the purposes of AE, anyone with a contract of employment will be auto enrolled in the AE scheme if they meet certain criteria.
An employment contract doesn’t have to be written down – it can be verbal or implied. We have noticed that some company directors who take a salary from their business, don’t necessarily realise that this creates an implied contract of employment.
Your retirement planning could be irrevocably damaged if you are enrolled in a workplace pension scheme, and your pension pot:
- is protected; or
- is approaching the lifetime value allowance (currently £1 million).
Under the terms of several protections, you can’t join any new schemes where you will make new contributions without losing your protection and incurring significant tax penalties.
Recent changes to the rules on auto enrolment mean that individuals with pension protection in place no longer have to be assessed by their employer and enrolled in an AE scheme.
You should tell your auto enrolment administrator that you have a pension protection so they can make sure that you are not automatically enrolled in the AE scheme. They can also prevent you from being entered into the scheme every three years, when your business’s re-enrolment date comes around.
If the value of your pension pot is approaching the lifetime value allowance, it’s important that you speak to an IFA for advice on your options.
For help and advice on auto enrolment workplace pensions, please contact Susan Elsdon.