What is auto-enrolment?
Auto-enrolment is a government initiative designed to help people build up their retirement savings through a workplace pension. If you are eligible, your employer will make regular payments into your pension pot. Depending on your plan rules, monthly contributions may also be taken from your salary automatically. These will be deducted before you receive your pay each month.
The benefits of auto-enrolment
Easy access to a pension
A big advantage of auto-enrolment, as its name suggests, is that you join your pension scheme automatically and your monies will automatically be invested in a default investment strategy. So, you don’t have to do anything yourself to join the plan. Once you have joined, you should review your contribution levels, investment options and target retirement age that you have been auto-enrolled at, to ensure they meet your requirements and meet your retirement plans. You may opt out of the plan, although this may mean you lose valuable benefits from your employer, so you should contact your employer before deciding to do this.
It also makes saving easier as money is paid into your pension from your employer and the government.
You need to remember, currently you can’t usually access the money in your pension until you are 55, at the earliest.
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Explaining contributions
When you're auto-enrolled, your employer is required to pay contributions into your pension pot. There is a minimum level they must meet, but some employers choose to add more.
Depending on your plan rules, you may also have to contribute some money from your salary each month, or you may have the option to do so. Your contributions to a pension plan receive tax relief, a top up from the government. If your contributions are taken from your salary before you are taxed you'll receive the tax relief immediately, under other contributing arrangements we will claim basic tax relief at 20% from the government and apply this to your account. If you're unsure what level of contributions you or your employer pays, you can check your 'Contributions explained' document in PlanViewer or ask your HR department. Find out more about contributions.
Five common questions about auto-enrolment
If you’re between 22 and the State Pension age and earn at least £10,000 a year working in the UK, it’s likely that you will have been auto-enrolled into your workplace pension. The easiest way to check is to take a look at your payslip. If you see pension contributions on there, you are a member of your company’s workplace pension.
If you meet the criteria for auto-enrolment, the majority of people will be auto-enrolled, but you are free to opt out at any point. If you opt out within a calendar month from the later of being auto-enrolled or receiving your ‘opt-out notice’, you will receive a full refund of any contributions you have made and you will be treated as never joining the plan. After that deadline, any contributions you have made will stay in your pension account, even if you opt out. You will automatically be re-enrolled into your pension plan again, typically every three years. If you change your mind after you have opted out, you may be able to opt back in – contact your employer if you want to do this.
You should think carefully before you decide to opt out. You would be giving up valuable pension contributions from your employer, along with tax relief and any other benefits your plan may offer, such as life insurance. You may also have to make other arrangements to save for your retirement.
Pensions and retirement planning can be complex. If you are unsure about whether a pension investment, retirement service or course of action is suitable for you, please speak to an authorised financial adviser.
You won’t be auto-enrolled if you earn less than £10,000. But if you earn more than £6,240, you have the right to join your workplace pension and receive contributions from your employer. Please contact your employer if this is the case.
While people aged under 22 aren’t automatically enrolled, if you’re 16 or older you still have the right to join your workplace pension and may also receive contributions from your employer. Please contact your employer if this is the case.
- If you’ve been automatically enrolled into your pension, whether for the first time or at the three-year mandatory re-enrolment, you can opt out within the first month. Any contributions paid within the first month since being enrolled will be refunded.
- If after the month following your enrolment, you decide to stop contributing you can ‘leave the scheme’ (this is known as ‘ceasing active membership’). You do not lose any money you’ve contributed if you leave a pension, as it stays invested for you until you’re ready to access it. Currently, withdrawals from a pension product are not normally possible until you reach age 55. This is due rise to 57 in 2028.
You can leave or 'opt out' at any time. The quickest and easiest way to opt out is using PlanViewer. We’ll notify your employer immediately so that they can stop contributions being deducted from your pay. Alternatively, you give us a call on 0800 368 1737.
You should think carefully before you decide to opt out of, or stop contributing to, your pension. You may be giving up valuable pension contributions from your employer, along with tax relief and any other benefits your plan may offer, such as life insurance. You may also have to make other arrangements to save for your retirement.
Check the contributions in your pension by logging in to PlanViewer today.