Kevin Read discusses a recent case where auto-enrolment problems almost proved very costly.
Whenever the pensions lifetime allowance (LA) has been cut, it has been possible to claim ‘fixed protection’ (FP), which allows the claimant to keep the higher LA towards which they have been saving. The FP is subsequently lost, however, if there are further pension inputs into any of the claimant’s pension schemes.
Auto-enrolment
Under auto-enrolment, new employees must be enrolled in a pension scheme by their employer (subject to a possible deferment of up to three months). Their joining pack from the pension scheme will explain how the employee can opt out of auto-enrolment. This must be done directly with the scheme, which then notifies the employer and refunds any contributions made.
If starting a new job, it is clearly important that someone who has claimed FP opts out of auto-enrolment.
Moan v HMRC
In Moan v Revenue and Customs [2022] UKFTT 118 (TC), before joining, the appellant (an IFA) informed his new employers that he did not wish to join the company’s pension scheme, as he was intending to claim FP 2016. He signed his employment contract on 10 September 2016 but did not sign the payroll deduction form, believing this meant he would not be auto-enrolled. He started work on 17 October 2016 and, hearing nothing further, thought that his wish not to join had been actioned.
The company supplied Mr Moan with a smartphone, which proved to be very unreliable. Sometimes he would go days without receiving messages and then dozens of emails would get delivered at once, some missing the attachments.
In June 2017, he was finally able to gain online access to his payslips (after getting a new phone). He realised that pension contributions were being made on his behalf and asked his employer to cancel his enrolment and refund his contributions, which they confirmed they would do. He then applied to HMRC for a reference number confirming his FP 2016, which they issued. However, when the company’s pension scheme subsequently refused to cancel his enrolment, HMRC revoked his FP 2016.
Grounds of appeal
Due to the phone issues, Mr Moan denied having ever been ‘given’ the information from the pension scheme about his auto-enrolment, as he had never seen the relevant email and attachment when it had apparently been sent.
He also argued that the notice apparently sent to him was, in any event, invalid as the wrong auto-enrolment date had been included in the email from the pension provider.
First-tier Tribunal decision
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The relevant email was received by Mr Moan’s email account. He had deleted it, either without opening it at all or doing so and dismissing it as junk email. The email stated that the automatic enrolment date was 1 February 2017. Receipt of the email on 6 March 2017 resulted in the information being ‘given’ to Mr Moan.
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Mr Moan’s automatic enrolment date was his start date of 17 October 2016. Even if a notice of deferment had been given in time, the maximum permitted deferral would have been three months, being 17 January 2017. However, the date given in the 6 March 2017 notice stated that the automatic enrolment date was 1 February 2017.
The time limit (one month) for opting out of auto-enrolment runs from the date on which a jobholder is given correct enrolment information, so his FP was reinstated.
Practical tip
Mr Moan’s FP was saved due to an error in the notice he had been sent. Neither he nor his employer seemed to have been aware of the correct procedures for opting out of auto-enrolment. Avoid similar issues as the loss of FP can, in the end, cost many thousands of pounds in extra tax.
