It is over three years since the first employers were required to automatically enrol workers into a workplace pension scheme. Since then, the Government has begun to acknowledge that there are certain groups of people for whom automatic enrolment may not be appropriate.
Some exemptions to the auto-enrolment duty have already been created and a consultation period concluded last week which proposed that further exemptions should be implemented from April 2016.
Why not enrol everyone?
The Government has stated that its policy intention with auto-enrolment was to target those people who were not saving for retirement or who were saving insufficiently. The method used to solve this problem was to require all ‘eligible jobholders’ (the vast majority of the working population) to be automatically enrolled into a pension scheme.
Subsequent discussion on the subject has made it clear that auto-enrolment may not be appropriate for everyone and the Government has already exempted a number of categories of worker. Auto-enrolment of individuals in these categories is effectively optional and an employer will not breach its legal duties if it chooses not to automatically enrol such people.
Workers who are currently exempt from the auto-enrolment duties include, for example, those who have given or been given notice of termination of employment.
There is currently an exemption from the requirement to be automatically enrolled for some (but not all) company directors. In particular, a director who is employed under a contract of employment will only be exempt if the company employs no other people under a contract of employment.
If implemented, the recent draft regulations will introduce a general exemption from auto-enrolment for all company directors.
The effect of this will be that a company may still choose to automatically enrol its directors (and, if it does, all of the usual duties will apply) but it will not be required to do so.
Partners in a Limited Liability Partnership
The Government’s recent consultation indicates that it wishes to apply the same exemptions to LLP partners as to company directors. However, it believes that there is a need to distinguish between ‘genuine partners’ in an LLP and those individuals who may be labelled as ‘partners’ but who are, in reality, more like employees.
To make this distinction, the exemption uses the same test as is applied for tax purposes to identify ‘salaried members'. Using the language of the consultation paper, the exemption will only apply to those ‘genuine partners’ in an LLP who are not ‘salaried members’ for tax purposes.
As with company directors, this will mean that ‘genuine partners’ will not be required to be automatically enrolled but, if an LLP wished to automatically enrol them, all of the usual duties would apply.
These provisions will be a welcome simplification to the auto-enrolment process, particularly for small businesses where the directors will no longer be required to go through the administrative process of automatically enrolling themselves. There is an extra test to be applied before partners in an LLP can benefit from the exemption but as this refers to existing tax legislation, any potentially affected partners should already be familiar with those provisions.
 section 863A of the Income Tax (Trading and Other Income) Act 2005