Pension Auto-enrolment
What is Pension Auto-enrolment?
Auto-enrolment is a legal requirement that requires employers to automatically enrol eligible workers into a qualifying workplace pension scheme.
Where minimum contributions are required, both the employer and employee normally contribute. In most schemes using qualifying earnings, the total minimum contribution is 8%, with the employer paying at least 3%.
Employees can opt out if they choose, but eligible workers are generally re-enrolled by their employer approximately every three years if they still meet the criteria.
What is the Definition of a Worker?
A worker can include someone who works under a contract of employment or another contract to perform work or services personally, provided they are not genuinely carrying on the work as part of their own independent business.
This means that some individuals described as self-employed contractors may still be treated as workers for auto-enrolment purposes, depending on the actual working relationship.
Short-term, seasonal and temporary staff can also be workers and may need to be assessed for auto-enrolment.
What are the Different Categories of Workers?
Eligible jobholders
Workers aged 22 to State Pension age who earn more than £10,000 a year must normally be automatically enrolled into a qualifying workplace pension scheme.
Non-eligible jobholders
This includes workers aged 16–21 or State Pension age–74 who earn more than £10,000 a year, and workers aged 16–74who earn more than £6,240 but no more than £10,000 a year.
Non-eligible jobholders have the right to opt in to a workplace pension. If they do, the employer must normally contribute.
Entitled workers
Workers aged 16–74 who earn £6,240 a year or less have the right to join a workplace pension scheme. The employer must provide access to a scheme but does not normally have to contribute.
What are my Duties as an Employer?
Workers who have been automatically enrolled have the right to opt out. The opt-out period is normally one month and the worker must follow the prescribed opt-out process, usually using a notice provided by the pension scheme. Contributions already deducted are refunded following a valid opt-out.
Employers must not encourage or induce workers to opt out. Employers also have ongoing duties to monitor workers' ages and earnings and, approximately every three years, eligible workers who have left the scheme may need to be automatically re-enrolled. Employers must also complete a re-declaration of compliance with The Pensions Regulator.
Employers can choose to postpone assessing and enrolling a worker for up to three months in certain circumstances, for example when a new employee starts work. The employer must give the worker the required postponement notice, and the worker may still have the right to join the pension scheme during the postponement period.