A pensions expert has warned that businesses who outsource the opt-out part of automatic enrolment to third parties are not complying with an important part of legislation.

The law clearly states that opt-out forms must come from the pension scheme. The Pensions Regulator states that in the majority of cases, jobholders may only obtain an opt-out notice from the pension scheme into which they have been automatically enrolled, and not from the employer. This is a safeguard to ensure that the jobholder’s decision to opt out is taken freely and without influence from the employer.

A jobholder could feel pressured into opting out if they were to receive the opt-out notice from their employer, either separately or with other pension scheme information and such action could, in certain cases, constitute a breach of the inducement legislation.

Occasionally, the administration of the pension scheme is delegated to the sponsoring employer in the trust deed. In these exceptional circumstances, the jobholder can get the opt-out notice from the employer.

The law relating to inducements came into force on 1 July 2012 and is an important safeguard for entitled workers and jobholders.

Regardless of the size of your PAYE scheme, the law on the new employer duties and safeguards commenced from July 2012, even if your staging date is months and years away.

The safeguards have been put in place to protect entitled workers and jobholders, but the prohibited recruitment safeguard extends this protection to job applicants as well.

If employers are planning to outsource automatic enrolment, use extreme caution, as you could be in breach of regulations if a third party is acting on your behalf!

Section 8 of The Pensions Regulator’s guidance has full details on what employer’s must do to adhere to the new safeguards for individuals.