Automatic Enrolment for Employees
While most advice surrounding auto-enrolment, occupational, and workplace pensions is regulated by The Pensions Regulator, not the Financial Conduct Authority, we believe it’s important to understand what automatic enrolment means for you.
Understanding Automatic Enrolment
A workplace pension, also known as a ‘company pension,’ ‘occupational pension,’ or ‘works pension,’ is a retirement savings plan arranged by your employer. It’s a hassle-free way to accumulate savings for your retirement while you’re still earning.
The beauty of a workplace pension is that you’re not saving alone. In addition to your contributions, your employer and the government, through tax relief, also contribute to your pension pot.
The Need for Automatic Enrolment
Many people are not saving enough to sustain the lifestyle they envision post-retirement. Coupled with increased life expectancy, this results in a potential income shortfall during retirement. Automatic enrolment into a workplace pension helps address this gap.
Who Qualifies for Automatic Enrolment?
You will be automatically enrolled in a workplace pension if you:
- Are not already in a qualifying pension scheme
- Are 22 years old or over, and under the State Pension age
- Earn over £10,000 a year (subject to annual review)
- Work, or usually work, in the UK
Opting Out and Rejoining
You can choose to opt-out of the scheme within one month of becoming a member. If you do, you will receive a refund of any contributions you’ve made as if you were never part of the scheme. After this period, your contributions may stay in your pension pot until you retire, depending on the scheme.
If you’ve previously left the scheme, you can opt back in. However, if you’ve opted in and left or ceased membership within the last 12 months, your employer can decide whether to enrol you again.
Your employer is required to re-enrol you into the pension scheme every three years if you’ve opted out or stopped making payments. This ensures you have the opportunity to reassess your financial circumstances and make informed decisions about your retirement savings. You can choose to stay in the scheme or opt out again.