Automatic Enrolment

The Pensions Advisory Service

Automatic enrolment is a Government initiative to help more people save for later life through a pension scheme at work.

Automatic pension benefits for the employed

In the past, many workers missed out on valuable pension benefits, because their employer didn’t offer them a pension, or they didn’t apply to join their company’s pension scheme.

Automatic enrolment changed this. It makes it compulsory for employers to automatically enrol their eligible workers into a pension scheme. The employer must also pay money into the scheme.

Automatic enrolment was phased in from 2012, starting with the largest UK employers. All eligible workers should have been automatically enrolled in their employer’s workplace pension scheme by 1 February 2018.

To be eligible for automatic enrolment, you must be

  • At least 22 years old;
  • Not yet at State Pension age;
  • Earning a salary of at least £10,000* p.a. (under current rules);
  • Normally working in the UK under a contract of employment

*This is known as the earnings threshold and you will be assessed for eligibility at each pay period. The earnings threshold will be pro-rated meaning the actual earnings threshold amount will differ if you are paid monthly, 4 weekly, fortnightly or weekly. As you are assessed for eligibility at each pay period you may find that you are automatically enrolled if your earnings increase - if only for a short period.

For example, if you are paid monthly, you will be deemed to meet the earnings threshold if your monthly earnings reach at least £833. If you are paid weekly you are deemed to meet the earnings threshold if your weekly earnings reach at least £192.

You will receive tax relief on your contributions. If you're not eligible, you can still ask to be put into a pension scheme and your employer may pay into it.

For employers who don’t already run a suitable pension scheme, and don’t want to set one up, there is a Government-backed scheme they can use instead. This is called the National Employment Savings Trust (NEST).

Opting out of automatic enrolment

The rules about joining, leaving and how you invest your money are similar to other types of defined contribution schemes.

Automatic enrolment puts you into the scheme, but it’s up to you if you wish to leave the pension scheme. This is referred to as opting out. There are time limits for opting out and getting a return of your contributions. It's possible to opt out at any other time but your contributions and those of the employer will remain in the pension scheme. If you do decide to opt out, it’s important to remember that your employer will be required to put you back into the scheme every three years. The employer would only re-enrol you if you still meet the automatic enrolment criteria

If you’re thinking about opting out, you may be missing out on valuable benefits.

I have been told that I must join the pension scheme. Why is it compulsory?

Although you must be enrolled into the scheme if you meet the criteria, it's not compulsory to stay in it. You can choose to opt out at any time. If you opt out within one month, any contributions you have already made will be refunded, as if you had never joined. If you opt out after this, the type of scheme your employer sets up will determine whether you receive an immediate return of contributions, less any deductions, or a preserved pension.

I have various deferred pensions with various ex-employers. Can I transfer these previous benefits to my employer’s pension scheme?

It depends on what type of scheme your employer decides to use for automatic enrolment.

Most other pension schemes may accept transfers in, but there is no compulsion for them to accept them, other than a stakeholder pension scheme, and, if they do, there may be a minimum transfer value they will accept. You should check this with the scheme’s administrator.

I have just found out I am to be automatically enrolled but do not have much information other than this. When should I get more information?

Your employer is obliged to automatically enrol eligible workers into a qualifying workplace pension scheme once the employer has reached what is known as their staging date. Your employer must provide you with the information about your automatic enrolment within six weeks of your automatic enrolment date.

You can't opt-out of automatic enrolment but can opt-out of membership of the scheme, after you have been enrolled, by completing the opt out form within the required time limits. Your employer is therefore obliged to deduct the first pension contribution from your earnings. If you opt-out, your refund should be made within one month of your valid opt-out notice being received or your first pay day following this one month period.

Quick Facts

  • Automatic enrolment makes it compulsory for employers to offer eligible workers a workplace pension.
  • The employer must automatically enrol every eligible worker into the scheme.
  • The employer must make a minimum contribution to the scheme.
  • You will receive tax relief on your contributions - but you’re free to leave the scheme at any time.
  • The earlier you start saving into a pension, the better it is.
  • Employer contributions and tax relief make pensions an attractive option for saving for your retirement.