Employers giving staff occupational pensions for life assurance perks risk fines

Employers that have allowed staff to join an occupational pension scheme purely to take up life assurance perks must review their practice or risk being fined by the Pensions Regulator.

Although the Pensions Act 2004, which came into effect in December 2005, banned the practice unless schemes satisfy exemption criteria, so far the rule has not been enforced.

Mark Paxton, group risk team leader at Barnett Waddingham, however, said that this is expected to change.

He added that individuals who have opted out of active pension scheme membership or who are still in a scheme’s waiting period to join, qualify for an exemption to take life-only cover.

However, to avoid potential problems, Paxton advised employers to take legal advice.