Under a law introduced in 2012, all employers must eventually offer a workplace pension scheme and automatically enrol eligible workers in it. This requirement has applied to larger employers since October 2012 and will apply to all employers by 2018.
How are workplace pensions changing?
To help more people save for their retirement, the government has made major changes to how workplace pensions operate.
In the past it was up to workers to decide whether they wanted to join their employer’s pension scheme.
But by 2018 all employers will have to automatically enrol their eligible workers into a workplace pension scheme unless the worker opts out.
As a result, many more people will be able to build up savings to help cover their retirement needs.
When does automatic enrolment start?
Automatic enrolment is being introduced in stages up until 2018.
The largest employers started first, followed by medium-sized and then small employers.
If you haven’t yet been enrolled in a scheme, your employer will tell you the exact date it will begin automatic enrolment and whether or not you’re eligible for their scheme.
Who will be automatically enrolled?
Whether you work full time or part time, your employer will have to enrol you in a workplace pension scheme if you:
- Work in the UK.
- Are not already in a suitable workplace pension scheme.
- Are at least 22 years old, but under State Pension age.
- Earn more than £10,000 a year (tax year 2017-18).
As long as you meet these criteria you’ll also be covered if you’re on a short-term contract, an agency pays your wages, or you’re away on maternity, adoption or carer’s leave.
If you earn less than £10,000, but above £5,876 (2017-18) your employer doesn’t have to automatically enrol you into the scheme.
However, you can still ask to join, in which case your employer can’t refuse and must make contributions for you.
Do I have any choice about being enrolled?
You can opt out of your employer’s workplace pension scheme after you’ve been enrolled.
But if you do, you’ll lose out on your employer’s contribution to your pension, as well as the government’s contribution in the form of tax relief.
If you decide to opt out, ask the people who run your employer’s workplace pension scheme for an opt-out form.
You must then return your completed form to your employer, not to the people who run the scheme.
If you decide to opt out within a month of being enrolled, any payments you’ve made into your pension pot during this time will be refunded to you.
After the first month, you can still opt out at any time, but any payments you’ve made will stay in your pension pot for retirement rather than be refunded.
You can re-join your employer’s workplace pension scheme at a later date if you want to.
By law your employer must re-enrol you back into the scheme approximately every three years, as long as you still meet the eligibility criteria.
How much will I have to contribute?
There is a minimum total amount that has to be contributed by you, your employer, and the government in the form of tax relief.
This total minimum contribution is currently set at 2% of your earnings (0.8% from you, 1% from your employer, and 0.2% as tax relief).
In 2018 the amounts will increase.
The minimum contribution applies to anything you earn over £5,876 up to a limit of £45,000 (in the tax year 2017/18).
This includes overtime and bonus payments.
So, if you were earning £18,000 a year, your contribution would be a percentage of £12,124 (the difference between £5,876 and £18,000).
Your employer will let you know how much of your earnings you’ll need to contribute.
They might tell you this as a sum of money or as a percentage.
If they give you a percentage, you can find out what it means in pounds and pence using our Workplace pension contribution calculator.
Increases in the minimum contribution
The total minimum contribution is currently set at 2% of your earnings (0.8% from you, 1% from your employer, and 0.2% as tax relief).
From April 2018, it will increase as follows:
April 2018 to March 2019: 5% of your earnings (2.4% from you, 2% from your employer, and 0.6% as tax relief)
From April 2019 onwards: 8% of your earnings (4% from you, 3% from your employer, and 1% as tax relief)
Should I stay in or opt out?
For most people, staying in a workplace pension is a good idea, particularly if the employer is contributing to it.
Workplace pensions are a great way to save for retirement.
However, there are circumstances in which it might not make sense to stay in. For example, if you’re dealing with unmanageable debt.
Automatic enrolment when you have more than one job
If you have more than one job, each job is treated separately for automatic enrolment purposes.
This means some jobs will sign you up to pay into a pension automatically, while others won’t.
Each of your employers will check whether you’re eligible to join their pension scheme. If you are, then you’ll be automatically enrolled in that employer’s workplace pension scheme.
If you don’t want to be a member of more than one scheme you can choose to opt out of one of them, but you don’t have to. You can pay in to more than one pension scheme if you want to.
If you earn more than £5,876 but less than £10,000 in any of your jobs you won’t be automatically enrolled into that employer’s pension scheme, but you can ask to join. If you do, your employer also has to contribute.
If you earn less than £5,876 in any of your jobs you can still ask to join that employer’s pension scheme, but your employer doesn’t have to contribute.
Use our Workplace pension contribution calculator to check what the pension situation is for each of your jobs. Remember, information for each job must be put into the calculator separately – don’t add your salaries together or you’ll get the wrong result.