If your Contracts of Employment make membership of your pension scheme compulsory, your employee won't be able to opt out of the pension scheme.
If you haven't made membership compulsory your Designated Employee can opt out of the pension scheme at any time. You are not allowed to encourage your workforce to opt out of the pension scheme or offer any incentives or rewards to those who do, for example additional pay or bonuses. You cannot dismiss anyone for being in the pension scheme.
How can someone opt out?
- If Designated Employee tells you that they wish to opt out of the scheme you must request written confirmation of their choice - a verbal instruction is not sufficient.
- When a Designated Employee opts out of the pension scheme, they will need to provide written instruction of this and confirm they no longer wish to be in the scheme. If they are opting out of the pension scheme after you have provided them with a Notice, they will need to record this decision on the Notice and return this to you. You will then need to retain this document for 7 years and enrol them back in after 3 years.
- If your Designated Employee returns a completed Notice choosing the scheme they want to be in but later wishes to opt out of the scheme, they must tell you by providing a physical written or digital record (email), and you will need to keep this notification for 7 years. As you will need to ensure that the information is submitted by the individual themselves and then retained you will need to decide what method of submitting this documentation works best for your organisation. We suggest retaining this same information when processing requests to cease contributions by an Employee so that you have a record of the decision they have taken. The retention of these documents must be in accordance with your data protection policies.
- Once someone has been enrolled in the scheme, if they opt out in the first 6 weeks both of you will have your contributions refunded. You will need to agree with your Pension Provider when the contributions will be paid across to them and what happens with the contributions that need to be refunded. Your Pension Provider will likely pay the contributions back to you and you will be responsible for ensuring that your worker receives their contributions.
Who do we need to tell when a Designated Employee has opted out?
- You will need to ensure that you update Revenue Service's Employer Return with this information as they need to know that someone has opted out of the scheme.
- Revenue Service do not need to be contacted directly or be given copies of the documentation you collect unless it is explicitly requested by them. You should make sure that the Returns Creator, or other software you use to complete your quarterly return, is updated with a revised Automatic Enrolment date. When you reach this date, you will not be able to submit your next return until the person is enrolled back into the scheme or the date is updated if they decide to opt out again after being enrolled.
Will we be asked to provide paperwork when a Designated Employee has opted out?
- You may be asked to provide copies of the documentation you hold to the Revenue Service
- The Revenue Service will audit employers periodically, if you are selected for review you will need to provide copies of paperwork and evidence to show who has opted out of your pension scheme. It won't make any difference whether you are using a scheme through your Pension Provider or Your Island Pension (YIP), should you be asked to provide the audit documentation you will need to supply it promptly in line with the Secondary Pensions Law.
It is important to recognise the long-term benefits for your Designated Employees from saving early for their retirement. You may wish to encourage all your workforce to join a pension scheme as early as possible. There can be valid reasons why someone has opted out and their personal circumstances could mean that not being in a pension scheme is the best option for them. As circumstances can change, your Designated Employee may find themselves in a position to be able to join a scheme.
What do we need to do if our Designated Employee asks to join the pension scheme?
- If your Designated Employee opted out of your pension scheme and has now opted back into the scheme you must enrol them.
- If they opted out and have now requested to opt back in again, you must enrol them within a month of the date of request or 3 months from the date they previously opted out - whichever is later.