Automatic enrolment explained

Automatic enrolment is the core employer duty of work-based pensions reform. It means that, as an employer, you must:

• ensure that you provide a qualifying scheme;
• automatically place all your eligible jobholders into that scheme and tell them you’ve done so;
• make a minimum contribution of 3% of qualifying earnings for each employee in the scheme (although you could choose to pay more); and
• make a total contribution of 8%, of which you could choose to pay the full 8%, or choose a combination of employer and employee contributions.

You must also provide your jobholders with information about automatic enrolment and the scheme they’ve been enrolled into. The sort of information you must give them includes:

• the objective of automatic enrolment and scheme details;
• value of contributions (a percentage, or amount for DC schemes);
• information about the right to opt out and the consequences;
• the opt out process and where to get a form; and
• information about opting back in and automatic re-enrolment.

The key differences between automatic enrolment and the usual way of joining a scheme are as follows:

• The jobholder cannot be required to give their consent to join or remain a member of the scheme.
• They also cannot be asked to provide any information, such as making an application.
• They must automatically become a member and not be asked to decide whether they want to join.

Automatic enrolment will not apply to everyone. Broadly, there are special rules for:

• single-person company directors;
• members of the armed forces;
• parliamentary staff;
• police officers;
• people working on vessels; and
• those in offshore employment.

If you think you fall into one of these groups, you may want to seek advice on your position regarding automatic enrolment.

The issue of cross-border pension schemes is complex, so if you’re based abroad, you should take advice about how the law applies to you.

As a basic principle, where a jobholder is working in Great Britain, their employer is obliged to automatically enrol them into a qualifying scheme – that applies no matter where their employer is based.

For example, if an employer is in France yet the jobholder works in Great Britain, the French employer (or their UK subsidiary if there is one) must automatically enrol that jobholder into a qualifying scheme.

Pension saving isn’t for everyone, so some people might want to opt out of the scheme.

Jobholders have a one month ‘opt-out period’ after they’ve been automatically enrolled. It’s important that you give them all the information about automatic enrolment and the scheme, so they can make an informed decision on whether opting out is the right choice for them.

If they choose to opt out, they’ll get a refund of any contributions they have made.

We will publish detailed guidance on the opt-out process in the future.

Please note: It is against the law for an employer to actively encourage an individual to opt-out, such as by offering alternative benefits that are mutually exclusive of being a member of a pension scheme. See the inducement section in the FAQs for more detail.

Jobholders aged at least 16 and under 22, or between state pension age and under 75 won’t be automatically enrolled, but they can ask their employers to opt them into their qualifying scheme.

Workers who earn below the minimum level of qualifying earnings (£5,035 per year) can also choose to opt into a scheme. However, there is no requirement for the employer to make contributions themselves and the scheme doesn’t have to be a qualifying scheme.

We will publish detailed guidance on the opt-in process in the future.

If any jobholders have opted out, you will have to automatically re-enrol them after three years, providing they are still working for you.

You will have to enrol all your eligible jobholders within one month of your staging date. It’s important that you plan ahead so you’re in a position to comply with your new duties in time.

Well in advance of your staging date, you should identify and contact a suitable provider or scheme which you intend to use to fulfil your duties.

Some occupational pension schemes already have a form of automatic enrolment built into their rules.

Employers may have made the fact that an employee will be automatically placed into the pension scheme part of their contract of employment. This doesn’t stop the employee from deciding to leave the scheme if they wish.