Auto Enrolment: The Basics

The law on workplace pensions has now changed. Every employer who has at least one worker will be required to enrol those workers into a workplace pension scheme and contribute towards it. Enrolment will be subject to the worker’s eligibility and the employer’s staging date. This is referred to as automatic enrolment, abbreviated to auto-enrolment.

It is referred to as auto-enrolment because employers must automatically enrol workers into an auto-enrolment compliant scheme even if they already make pension contributions for workers (unless the scheme is already auto-enrolment compliant).

The Pensions Regulator will provide your business with a staging date. For employers with less than 250 employees, staging dates will be between 1 April 2014 and 1 April 2017. It is worth noting that employers are also able to defer their staging date for up to three months.

How do I know if a worker is eligible to be enrolled in to the auto-enrolment scheme?

Where a worker’s monthly gross earnings are £833* or more and they are between the age of 22 and the state pension age, they must be auto-enrolled into the employer’s auto-enrolment compliant scheme.

If a worker’s gross monthly earnings are £833* or more but they are under 22 or above state pension age, they have the right to opt into the auto-enrolment compliant scheme.

If a worker’s monthly gross earnings are over £486* but below £833 they also have the right to opt into the auto-enrolment compliant scheme.

If a workers monthly gross earnings are below £486*, they have the right to join a pension scheme but the employer is not required to make contributions for them.

Can an eligible worker opt-out of the auto-enrolment scheme?

If a worker does not wish to be a member of the employer’s auto-enrolment compliant scheme, they are able to opt-out. The worker will need to sign an opt-out notice and this will need to be kept as a record by the employer. It is worth highlighting that all workers will be re-enrolled every three years therefore if a worker wishes to be opted-out again, they will need to submit another opt-out notice.

How much are employers required to contribute into the auto-enrolment compliant scheme?

Before 30 September 2017, employers are required to contribution 1% of the worker’s salary into the auto-enrolment compliant scheme and the worker is required to contribute 2% of their salary (total contribution 2%).

Between 1 October 2017 and 30 September 2018, employers are required to contribution 2% of the worker’s salary into the auto-enrolment compliant scheme and the worker is required to contribute 3% of their salary (total contribution 5%).

From 1 October 2018, employers are required to contribution 3% of the worker’s salary into the auto-enrolment compliant scheme and the worker is required to contribute 5% of their salary (total contribution 8%).

Employers can find additional guidance on which workers they need to auto-enrol by visiting the Pensions Regulator website.

*Figures correct as of 2015/2016.