Pensions are long term investments. You may get back less than you originally paid in because your capital is not guaranteed and charges may apply.
It is when you are put into a workplace pension automatically.
Automatic enrolment was introduced in October 2012 and requires employers to provide a workplace pension for their eligible employees.
The auto enrolment process has already started for larger companies first, followed by smaller companies with the aim of enrolling all eligible employees by April, 2019.
If you are an 'eligible employee' you will automatically start paying into a workplace pension set-up by your employer, who will also make a contribution on your behalf.
The government will also contribute a percentage towards your pension as a tax relief.
The date your employer starts auto enrolment is called the staging date.
You can use your PAYE (Pay As You Earn) reference, to find out when your employers staging date is by visiting The Pensions Regulator website.
This is found on your payslip, or you can ask your payroll department.
Only if you are an 'eligible employee'. This means you are:
At least 22 years old
Working in the UK
Earning a minimum of £10,000 each year
Not paying into a workplace pension already
Not yet at the state pension age (find out your pension age here)
Within 6 weeks of your staging date you will be given a document from your employer, which will include:
Your personal details, e.g. name, address
Which pension you have been enrolled into
The amount you will pay
The amount your employer will pay
Information on opting-out of the pension
A declaration of compliance
The declaration of compliance lets you know your employer has correctly followed their employer duties in setting up your pension.
If you do not get one, make sure you ask your employer or contact The Pensions Regulator.
There are two main reasons why you may not qualify for auto enrolment:
You do not meet the eligibility criteria
You already pay into a workplace pension which meets the government's standards
You can still ask your employer to let you:
Opt-into the auto enrolment pension scheme. Even if you are not eligible for automatic enrolment, you may still be able to join. Your employer will also have to make a contribution if you are added.
Pay into a separate pension scheme if you cannot opt in. Your employer does not need to make any contributions if you do this.
No, while you will be automatically enrolled if you are eligible, you can choose to cancel your enrolment after the staging date. This is known as 'opting out'.
To opt out, you must complete an 'opt-out form' and give it back to your employer.
The earlier you decide to opt out, the better the chance of getting the money you paid in back, for example:
Opt out within first month: You will get all of your contributions back in full.
Opt out after first month: It is unlikely you will get your money back until you reach your retirement age, however this depends on the pension scheme your employer enrols you onto.
Your employer must put you back into the pension every three years. This is in case your financial situation changes and you would benefit from the pension scheme and government contributions at a later date. You will still have the option to opt out every three years.
Yes, by opting out and enrolling at a later date.
Your employer only needs to accept you onto the workplace pension once in a 12-month period, meaning you can only opt-out and opt back in once a year.
Opting out means you will lose out of any contributions from your employer or the government.
The amount you and your employer have to pay into your pension will gradually increase over the next few years.
The maximum combined contribution increased to 8% from April 2019, here is how your payments will have been calculated, based on your qualifying earnings:
|Who pays||Until March 2018||From April 2018||From April 2019|
|Government tax relief||0.2%||0.6%||1%|
This is worked out by taking your yearly income and deducting the qualifying threshold for pensions, which is £6,240 in the 2020/21 tax year.
For example, if your employer pays you £30,000 a year, the figure of £6,240 will be deducted. This means you have £23,760 of qualifying earnings.
Your employer will choose a pension scheme, but they will give you all the details about it. There are two popular types of pension scheme:
Defined benefit pension schemes - This type of pension is based on your earnings over the entire length of your employment. Two examples of this type of pension are the final salary schemes and career average revalued earnings (CARE) schemes.
Defined contribution pension schemes - Also known as money purchase schemes, this type of pension will invest your contributions, which you can usually review throughout the term of the scheme. Your retirement pay-out will be worked out based on how much you and your employer have contributed and how the scheme performs throughout the pension schemes term.
Yes, if you are an eligible employee, your employer is required by law to enrol you onto their workplace pension, unless you are:
A member of the armed forces
The only person in a company (director)
If you are not on the exception list above and your employer refuses to enrol you into a pension, contact The Pensions Regulator for help.
Not always, contact your employer or the pension scheme to find out your options.
Each employer will check if they need to automatically enrol you, this means you could get enrolled into more than one pension scheme.
You can help ensure you have the retirement you want by finding the best personal pension plan to make your money work as hard as it can.