More and more workers are being automatically enrolled into workplace pension schemes by their employers. This is an easy way to start saving for retirement. Read on to find out what to expect when automatic enrolment takes effect in your workplace.
Your employer will probably enrol you in a workplace pension scheme
Your employer is legally required to enrol you into a workplace pension scheme and to make contributions to it if you:
- Work in the UK
- Are aged between 22 and State Pension age
- Earn more than £10,000 each year
- Are not already in a qualifying pension scheme
Even if you’re not eligible for automatic enrolment, you still have the right to join a workplace pension scheme, if you ask.
And depending on your earnings levels, your employer might still be required to contribute to your pension if you join.
Your employer will tell you what’s going to happen
Your employer will explain in writing exactly how automatic enrolment will affect you.
In many cases this will be done by letter, but some employers might use other methods, such as email.
The precise timing of your employer telling you about automatic enrolment depends on the size of the business you work in and when the business started.
The largest employers started enrolling workers first, followed by medium-sized and then smaller ones.
Most employers who started in business before April 2012 will now be included in automatic enrolment and have started the process. The remaining employers are those who started in business after 1 April 2012. These new employers will be starting automatic enrolment throughout the rest of 2017 up until 1 February 2018 when the process should be complete.
Your employer will be in touch around the time that they have to start automatically enrolling their workers.
Your employer will tell you:
- What type of pension it is
- When you’re being enrolled
- Who operates the pension you’re being enrolled into
- How to opt out if you don’t want to join the scheme
- The level of contributions you and your employer will pay into the pension
If you’re already in a workplace pension scheme, your employer will tell you that automatic enrolment doesn’t affect you.
If you’re not already in a workplace pension, but you don’t meet all the criteria to be automatically enrolled, then your employer will tell you:
- That you have the right to join
- Whether or not your employer will make contributions to your pension
What happens next
If you’re being automatically enrolled, unless you want to opt out you don’t need to do anything.
Your employer will have to make at least the minimum required contributions into your pension.
You will usually have to pay in too – your contributions will be automatically taken from your pay packet.
If you aren’t eligible for automatic enrolment, then it’s up to you to decide on the next steps.
If you want to join a workplace pension scheme, you’ll have to tell your employer. They can’t refuse your request.
Your employer must let you opt out if you want
If you’re being automatically enrolled, the letter you receive from your employer will explain how to opt out of the pension.
In general you’ll need to submit a form, but some pension schemes will allow for opting out online or by phone.
Your employer will tell you who you need to contact, but they’re not permitted to handle the process for you – for example, by giving you an opt-out form.
This is to prevent employers from encouraging their workers to opt out.
If you opt out within one month of joining, your employer will refund any money you’ve paid into the pension scheme.
If you opt out later, the money will usually stay in the pension scheme until you retire.
If you opt out, your employer is required to automatically enrol you into their pension scheme again every three years, assuming you remain eligible for automatic enrolment at that time.
What your employer can’t do
Your employer can’t opt out of their automatic enrolment duties. Also, while you have the right to opt out of your workplace pension, your employer can’t:
- Force or encourage you to opt out
- Treat you unfavourably for not opting out
The same principle applies during the recruitment process.
If you apply for a job, your prospective new employer can’t suggest you’re more likely to be hired if you opt out of their pension scheme.
If you think your employer might not be implementing automatic enrolment correctly, contact The Pensions Regulator.
You can do this anonymously.
What to do if your employer doesn’t have a workplace pension scheme
It’s in your interest that your employer spends some time shopping around for a good scheme on your behalf but this can be daunting, especially for small businesses.
If your employer doesn’t have a pension scheme and is not sure what to do, they can compare some of the schemes on offer through a new website called Pension Solution.
Pension Solution is run by the Pensions and Lifetime Savings Association (PLSA) which is an independent, not for profit organisation that represents workplace pension schemes.
Pension Solution is an online service created specifically to guide small businesses through Automatic Enrolment for the first time.
It offers a step-by-step guide to Automatic Enrolment, from what needs to be done by when, how much it will cost and which employees to enrol.
It also provides employers with an impartial guide to some of the pension schemes in the market which includes ratings from other employers who have used the provider.
Pension Solution normally costs £49 plus VAT to join, but Money Advice Service customers can do this for free.
Your employer should go to www.PensionSolution.co.uk and enter the promotional code MAS2017 in the ‘Pay Now’ section.
Also useful is the Pensions Regulator’s dedicated site for Automatic Enrolment, www.ThePensionsRegulator.gov.ukopens in new window.
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