The Financial Services Authority (FSA) has clarified today that the workplace pension opt-out rules for both the Department of Work and Pensions (DWP) and FSA are interchangeable and DWP rules are applicable to all members of an auto-enrolment scheme.
The new guidelines, published today in a policy statement by the city based financial watchdog, said appropriate changes have been made to the FSA Handbook to ensure that consumer interests are protected when auto-enrolment begins in 2012 and “regulatory red tape” is removed.
In the policy statement FSA said rules for cancelling and opting out of schemes are interchangeable and DWP opt-out processes are equally valid to all members of an automatic enrolment scheme. The clarification ensures that there is a single solution rather than two different, costly and potentially confusing procedures to be followed.
The FSA has also clarified that those automatically enrolled in the Group Personal Pension (GPP) are eligible for the same protections as those who are part of an occupational pension, ensuring its rules in relation to advice on workplace pensions cover all schemes.
The guideline further stated that automatic enrolment does not come under the ambit of Direct Marketing Directive (DMD). This will surely relieve firms since automatic enrollment of employees will not be interpreted as violation of DMD’s ban on inertia selling.
“With the introduction of automatic enrolment and the National Employment Savings Trust, the pension landscape is going to change significantly”, said Sheila Nicoll, director of conduct policy at FSA.
“We believe that most people will be better off remaining in, or joining, an existing workplace scheme where they will receive employer contributions”, she added.
Underling the effect of bad advice on client pensions, she said: “The potential consumer detriment resulting from poor advice in this area is substantial as employees may lose all employer contributions for the lifetime of their pension savings”.
The latest guidelines should help in clearing confusions, she said, adding: “We have also moved to ensure that any regulatory red tape is removed where FSA and DWP rules overlap”.