EU backs GPP auto-enrolment and personal accounts exemption

The European Union is to allow employers to automatically enrol staff into group personal pensions (GPPs) when personal accounts are introduced in 2012 removing a major obstacle in the way of the UK government’s plans for pensions reform.

The government has provided for the employers to be exempt from enrolling staff into personal accounts if they offer a company that is as at least as good and commit to automatically enrolling staff into it.

There had been fears that the Distance Marketing Directive, would prevent employers from auto-enrolling staff into contract-based pensions schemes such as GPPs and stakeholder pension schemes, when personal accounts are launched.

However, following lobbying from the pensions industry, the EU has now said that the directive will not apply to the government’s new scheme. The government is now expected to amend the Pensions Bill enabling auto-enrolment into GPPs.

The National Association of Pension Funds (NAPF), along with a vast number of UK pension bodies, has argued for this approach. The NAPF signed a letter in February this year urging the EU to allow auto-enrolling to occur.

Joanne Segars, chief executive of the NAPF, said: “The EU has made the right decision. This is welcome news for both employers and the pensions industry as a whole. It should materially help the introduction of auto-enrolment as proposed in the government’s 2012 pension reforms.

“This issue has been the elephant in the room for too long and now it has been resolved, we can move forward.”

John Jory, deputy chief executive at employee benefits provider B&CE, said: ”We have been actively campaigning for changes to pensions legislation to create a level playing field and harmonise the requirements and capabilities of the pensions market.”