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Following mounting pressure from a provider of financial products and services, HM Revenues and Customs have agreed to amend their guidance on auto enrolment and salary sacrifice opt-out preferences.
Friends Life, which pressurised the government department into amending the rules, felt that the current guidelines which prevented any employee from opting out of salary sacrifice was grossly unfair.
Under the original guidelines, if an employee wanted to opt-out of auto enrolment, they would be unable to leave their workplace salary sacrifice scheme as well. Employees would lose out financially, because they would still have to pay higher pension contributions.
Jason Cannon, Corporate Pensions Advisor at Lorica Employee Benefits described the previous HMRC position on auto-enrolment and salary sacrifice rules as "not sensible", saying that the "previous guidelines were designed for a different pension system entirely".
But the HMRC U-turn has meant a change in the regulations, so anyone opting out of auto enrolment can opt out of salary sacrifice schemes, too.
Cannon said: "The HMRC U-turn ensures that common sense applies when we consider how auto enrolling, opting out and salary sacrifice all interact. Now that the HMRC has changed its stance to reflect a level of flexibility, it now needs to be applied with the new auto enrolment requirements."
Speaking to HR Magazine, James Biggs, Head of Corporate Pensions added: "Thank heavens that someone has had the presence of mind to deal with this anomaly. It's a top effort by those that lobbied and the right end result. Most of our clients use salary sacrifice/exchange and will continue to do so throughout auto-enrolment. They will be most relieved about this."
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