UK - The UK government is making changes to the Pensions Bill which will prevent employers from encouraging or forcing employees to opt out of pensions saving.

Mike O'Brien, minister for pension reform, has announced proposed making it illegal to give employees inducements, such as higher salaries or one-off bonuses, if they opt out of the employer's pension arrangements.

A spokeswoman for the Department for Work and Pensions told IPE the move was a pre-emptive strike ahead of the introduction of personal accounts and auto-enrolment of existing schemes in 2012, as officials anticipate many employers will attempt to persuade or, worse, force employees to opt out of pensions saving, in part because employers will be required to contribute 3% of the employee's gross salary.

In a speech delivered today, O'Brien said the move is designed to leave employees free to decide if they want to be a member of a workplace scheme.

"It is very important that people are allowed to meet their retirement expectations by building up the savings they need. Decisions on whether or not to save in a workplace pension need to be taken free of unfair pressure. That's why we want to prevent employers from trying to pressurise staff or tempt them with ‘live for today' inducements into opting out of pension saving," said O'Brien.

"Whilst it might seem attractive in the short term to accept an inducement to opt out, when people reach retirement with a lower pension, they're likely to regret taking the easy option," he added.

Employers found "flouting the rules" will be forced by The Pensions Regulator (TPR) to put the worker back in the position they would have been in, by paying any arrears of contributions due, had they not been induced out of the scheme.

TPR could also impose penalties on any firm found to be in breach of the law from 2012, according to the DWP.

However, John Branford, of actuarial and pensions consultancy HamishWilson, has branded the move as being "well-meaning" but forcing employers to effectively subsidise means-tested benefits.

""We do not take issue with making it unlawful for unscrupulous employers to coerce workers into giving up their entitlement to an employer contribution," said Branford.

"However, there will undoubtedly be situations where conscientious and well-meaning employers consider it appropriate to alert workers to the fact they may lose out on means-tested state benefits if they take up the right to accumulate retirement savings through the Personal Accounts system. It would be scandalous if such employers felt prohibited from doing right by their workers for fear of being penalised by the Pensions Regulator.

"If the Government insists on being heavy-handed it would be tantamount to imposing a new tax on employers to subsidise the cost of means-tested benefits," he added.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email