Is this legal/allowed?

A question about : Is this legal/allowed?

Here's a scenario:

An employer with 100 staff wants to start 'auto-enrolment' now. They intend, as a firm, to opt out of the actual auto-enrolment and start a GPP.

The question is, the firm want to offer their staff an increase in salary equal to employee contributions (1% in year 1). However, if the staff decide not to enter the company pension they will not allow them to have the payrise.

Is that allowed? (to only offer a payrise if you enter their GPP?)

Best answers:

• If the employer meets all their obligations concering the new pension legislation and are not in breach of any other laws then there is nothing wrong with this.
  GPPs still need to offer autoenrollment unless they have already have quite a high minimum level of contribution, so I can't see how the employer is going to stich the employees up.
• What concerns me is that they are offering a payrise. Your payrise HAS to pay your contribution to a personal pension, whether you like it or not.
  That means 'real' payrises are non-existent.
  It shows that inflation-related annual payrises are being incorrectly used. A fundamental flaw in auto-enrolment.
• An employer covered by the auto-enrolment rules can't offer a pay rise only to those who opt out. But offering one only to those who opt in is permitted.
  However, there are employees who can have good reasons for opting out and it may seem unfair to them to be denied a pay rise when opting in would cost them large amounts of money, say if they were to lose a protected lifetime allowance because they made new pension contributions, or if they have opted for Flexible Drawdown and are prohibited from making more pension contributions for the rest of their life. Hopefully the employer will make exceptions for such cases.
  A firm is prohibited by law from opting out of auto-enrolment. Once their employee count reaches the threshold they are required by law to provide a compliant scheme.
  Pensions are part of employer costs. It's entirely predictable that an employer which wishes to avoid adding to their costs will limit pay increases until they have matched the extra costs of the pension provision. If they are sensible they will do this gradually so that it is not obvious to the employees that it is happening.
  There's no right to annual inflation-related pay rises, even though they happen in some firms.