Recent tax decision may open AE opt-out can of worms

In a recent decision, the First-tier Tax Tribunal has ruled that an individual still had a statutory right to opt-out of their employer's automatic enrolment scheme several months after he was enrolled on the basis that the enrolment information provided to him was incorrect. While this was helpful for the individual in this case, as it meant he could register for fixed protection, it may cast doubt on whether the opt-out window has closed for other savers.

Key facts

The individual in this case started a new job in October 2016. Throughout the recruitment process he made clear that he did not want to participate in his new employer's pension scheme, as he was likely over the lifetime allowance and he did not want to lose the opportunity to register for fixed protection.

In November 2016, his new employer postponed his enrolment into its pension scheme for 3 months. Subsequently, the individual was automatically enrolled into his new employer's scheme (operated by Aegon) in March 2017, with effect from 1 February 2017. Following his enrolment into the scheme, an email from Aegon was forwarded to the individual by his employer notifying him he had been automatically enrolled with effect from 1 February 2017. However, he claimed he did not see this or any other emails relating to his enrolment into the scheme.

The employer did not provide Aegon with a personal email address for the new employee, so emails from Aegon were sent to a generic 'pensionqueries' email address set up by the employer, and then forwarded on by the employer to the individual's work email address. As a result, they might have appeared to be spam or junk emails. On starting his new job, the individual had several IT issues, including emails frequently being automatically deleted and attachments not appearing. He was also unable to access his new employer's online payslip system until June 2017.

When the individual finally got access to his online payslips in June 2017, he realised he had been making pension contributions. He immediately sort to opt-out of the scheme and requested that his contributions be repaid. He also sought to register for fixed protection with HMRC.

Aegon refused to repay his contributions or to cancel his enrolment into the scheme as it believed that the auto-enrolment opt-out window had ended. When HMRC realised the individual had been enrolled into the scheme they rejected his application for fixed protection, as it said that his notice to opt-out of the scheme had been delivered out of time.

Key issues

The individual challenged HMRC's decision and argued that he had opted-out in time, on the basis that his automatic enrolment opt-out window had not started due to the fact that he had never actually been "given" the prescribed information about his enrolment into the scheme (as required by Regulation 9 of the Occupational Pension Schemes (Automatic Enrolment) Regulations 2010 (the AE Regulations)). He argued this on two grounds, namely, that:

1. he had not received the relevant information; and
2. in any event, the information sent to him was incorrect, as it contained an incorrect automatic enrolment date.

He argued that for notification to have occurred, he must have been given a genuine opportunity to opt out of the scheme; the technical issues he had experienced with his work emails and the fact the email had the appearance of a junk/spam email meant this had not occurred. In any event, the fact the information contained in the email was incorrect, meant it was invalid.

HMRC contended that notice had clearly been given for the purposes of the Auto-enrolment Regulations and that it was the individual's fault he had not read this. HMRC also argued that the fact the email contained incorrect information did not impact the obligation for the individual to submit a valid opt-out notice within the statutory time limit.

Decision

In relation to the first issue, the tribunal judge held that the information had been "given" on the basis that, based on the evidence, it was likely the emails sent by Aegon had been received by the individual even though he may not have read them or treated them as spam. More generally, the judge held that where a recipient is known to use an email address and has not objected to its use, any information sent to that address would normally be regarded as given, subject to any known technological failures or similar issues.

Notwithstanding this, the tribunal judge held that the individual's opt-out window had not started due to the fact that the enrolment date stated in the emails was incorrect. The emails from Aegon stated that the individual would be enrolled with effect from 1 February 2017. However, the employer's request to postpone his enrolment was issued late, meaning the correct auto-enrolment date was 17 October 2016. Even if the postponement notice had been issued in time, the latest possible auto-enrolment date was 17 January 2017.

As matter of principle, the judge held that if the auto-enrolment information provided is incorrect, any time limit expressed to run from that time cannot start to run until the correct information has been provided. This meant that the individual's opt-out window had not begun meaning his request to opt-out of the scheme had been made in time and, crucially, he could still register for fixed protection.

Comment

For the individual concerned, this was clearly a good outcome as it meant he could still register for fixed protection as he had always intended. This decision may also help other individuals who have failed to opt-out in time, where it can be shown that there was an error in the auto-enrolment information provided at the outset.

However, this may also raise concerns for auto-enrolment schemes and providers as it raises the prospect that an individual may still have a right to opt out months, or potentially even years, after they have been automatically enrolled, if it is known (or can be shown) that an element of the initial information provided to them was incorrect.

On the positive side, schemes and providers can take comfort from the fact that information sent to an email address known to be used by an individual will generally be considered to have been "given", even if the individual fails to read it or it ends up in their junk folder.

This decision was handed down on 4 April 2022 in the case of Ian Moan v Revenue & Customs Commissioners [2022] UKFTT 118 (TC).

If you would like to discuss how this decision may affect your scheme or organisation speak to your usual HSF adviser or contact one of our specialists.

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