UK – A "significant loophole" in the UK's auto-enrolment legislation that would allow for employers with hybrid pension funds to defer enrolling their employees until 2017 is to be reviewed by the Department for Work & Pensions (DWP).

According to consultancy LCP, the law initially intended to avoid complications over minimum contributions into hybrid funds that offered the better benefit of either a defined contribution (DC) or defined benefit (DB) as minimum contributions were slowly adjusted upwards.

"However," LCP said, "the definitions appear to have been drafted more broadly, enabling schemes making only DC benefits available to new entrants, within an otherwise mixed scheme, to qualify."

The consultancy's Andy Cheseldine claimed the "loophole" went unnoticed because of the legislation's complexity.

"We estimate that over 3,000 private sector employers were due to auto-enrol over 4m workers in 2013, and the majority of these enrolments could be pushed back to 2017 without any compensatory backdating," he said.

He added that primary legislation would be needed to solve the problem.

A spokesman at the DWP said: "Our intention remains that transitional arrangements only apply to employers who automatically enrol their existing workforce into the hybrid or defined benefit element of their pension scheme.

"In addition, all new members of staff joining these firms after their staging date will be automatically enrolled, and existing staff can still choose to opt in."

The news comes as a survey by Mercer found that 56% of companies were looking to postpone auto-enrolment by three months as a way of deferring costs and "easing the ongoing burden" on payroll and HR departments.

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