What is an unlawful inducement under the pensions auto-enrolment provisions?

Under s.54 of the Pensions Act 2008, employers must not take any action with the sole or main purpose of inducing a jobholder to opt out, or give up membership, of a qualifying pension scheme (without becoming an active member of another scheme). It is also unlawful to induce an entitled worker to give up membership of a relevant pension scheme.

It is irrelevant whether or not the inducement succeeds in persuading the worker to opt out or give up membership.

It would be unlawful, for example, for an employer to offer a worker a bonus on the express condition that they opt out of the qualifying scheme. A less explicit inducement to opt out could still be unlawful under s.54; it is the employer's purpose that is relevant. Guidance from the Pensions Regulator on Safeguarding individuals gives the example of a flexible benefits package where membership of a pension scheme is one of a range of elements on offer but which also includes non-pensionable benefits or cash alternatives such as a higher rate of pay. The Pensions Regulator states that employers that offer such a scheme must be confident that their main or sole purpose is not to induce workers to give up membership of a qualifying scheme.