What is automatic enrolment for employees?

What is auto-enrolment?

Auto-enrolment requires all employers (even those who just have one member of staff) to automatically enrol certain staff into a pension scheme and make contributions towards it. Usually the staff member will also have to make contributions to the pension scheme which the government may top up with tax relief.

Auto-enrolment is designed to ensure that more workers have easy access to a workplace pension scheme, enabling them to save towards their retirement and enjoy an income over and above their state pension.

If you have not been auto-enrolled but think you should have, talk to your employer as there may be a legitimate reason. If you think your employer is not complying with their pension duties (for example, if you are entitled to be automatically enrolled but your employer will not allow you to or encourages you to opt out of the scheme), then you can report this to The Pensions Regulator using their whistleblowing service.

How do I qualify for auto-enrolment?

Employers must automatically enrol all staff who are:

• aged 22 to state pension age. (You can work out when you will reach state pension age by using the calculator on GOV.UK.)
• working in the UK – under a contract of employment (OR under a contract to provide work or services as part of someone else’s business, that you cannot delegate to someone else – such people are known as ’workers’ for employment law purposes (see GOV.UK for more on worker status).
• earning over £10,000 a year (2023/24). £10,000 a year translates into the following amounts depending on how often you are paid:

Weekly	£192
2-weekly	£384
4-weekly	£769
Monthly	£833

 

If you do not meet the eligibility criteria, you might do at some stage in the future, for example when you have a birthday or if your earnings change.

If or when you meet the eligibility criteria, your employer should write to you and let you know. In the letter they must tell you:

• the date they have added you to the pension scheme;
• the type of pension scheme and who runs it;
• how much they will contribute and how much you will have to pay in;
• how you can leave the scheme if you want to.

Even if you meet the eligibility criteria, in some rare instances, your employer will still not have to automatically enrol you. You can find a list of the instances when your employer does not have to automatically enrol you, on GOV.UK.

If you are genuinely self-employed in business on your own account, then auto-enrolment does not apply to you. However, you may still want to set up a pension scheme. You can find more information on our website.

How much will I have to contribute?

Normally, a percentage (%) of your ‘qualifying earnings’ has to be put into your pension each pay day.

Your qualifying earnings include your wages or salary, bonuses, commission as well as other items, such as statutory pay, before any tax or National Insurance contributions are deducted.

	Overall total contribution required	Minimum from employer	Potential contribution from you
Currently	8%	3%	5%

 

Please note, the above percentages will apply to any qualifying earnings you have over £6,240 (for 2023/24) up to the limit of £50,270. The £6,240 and £50,270 yearly amounts translate into the following figures depending on how often you are paid:

	£6,240 a year	£50,270 a year
Weekly	£120	£967
2-weekly	£240	£1,934
4-weekly	£480	£3,867
Monthly	£520	£4,189

There are examples of how the qualifying earnings thresholds work in Marcie and Richard.

Your employer can pay the minimum amount required of them, or they can choose to pay more – meaning you have to pay less (unless you want to pay more in yourself). So how much you have to pay depends on how much your employer pays. For example, in the tax year 2023/24, the minimum total contribution is 8% of which your employer must pay 3%. Instead, if your employer chose to pay the full 8%, then you would not have to pay anything (unless you wanted to). If your employer pays their minimum amount of 3%, then you must pay 5% as the overall minimum contribution is 8%.

Your employer should tell you how much you will need to contribute. MoneyHelper provides a free workplace pension contribution calculator to help work out how much you will have to contribute.

If you do have to contribute, you will normally get tax relief to help make up your contribution – so the actual cost to you will be less than you think. There is an example below in Petro.

If the pension scheme uses a ‘relief at source’ method of tax relief, then the scheme provider is able to claim 20p in tax relief from the government on every 80p you pay in, regardless of how much you earn (this will be paid directly by the government into your pension pot). The tax relief therefore means that the potential contribution percentage for you, the employee, is as follows – assuming your employer is contributing the minimum of 3%:

• Net contribution (actual amount paid by you, the employee): 4%
• Tax relief claimed from the government by the scheme provider: 1% 

• Total gross employee contribution: 5%.

Some other providers use a different approach, (‘net pay arrangements’) which, generally speaking, means employees do not get any tax relief unless their earnings are more than £12,570 (in 2023/24). You should check with your employer which type of pension scheme they use. For more information about this, see our separate page: Tax relief on pension contributions.

Any contributions you make will be automatically taken from your pay packet and will lead to a reduction in your take home pay. However this may mean that you are entitled to more tax credits, universal credit or other income-related benefits – more on this below. It may also reduce the amount of student loan repayments you need to make.

Most pension schemes will allow additional regular or one-off contributions to be made into your pot, over and above the minimum percentages noted in the table above.

Can I opt out of auto-enrolment?

From the date you are automatically enrolled, you will have a month to choose to ‘opt out’ – contributions made during this period should be refunded. If you opt out after a month, the contributions you have already made will usually have to remain in your pension pot. Therefore if you do want to opt out, it makes sense to do this as early as possible. If you opt out, you can ask to re-join the scheme at a later date but your employer may only allow you to do this once every 12 months.

Even if you do not ask to re-join, your employer will normally put you back into a scheme every three years. This is called re-enrolment.

You can find out more about opting out of automatic enrolment, and rejoining, on the MoneyHelper website. Remember that if you opt out your employer will not make any contributions for you.

Please note that your employer cannot:

• encourage or force you to opt out of the scheme;
• unfairly dismiss or discriminate against you for staying in a workplace pension scheme;
• imply that someone is more likely to get a job if they choose to opt out of the pension scheme.

If you think that your employer may be doing any of these things, see Problems with auto-enrolment below.

Where do the pension contributions go?

Your employer must choose a suitable pension company to receive and invest all the contributions which are made. Your employer will have to give you the details of the pension company it has chosen.

The pension company will invest the contributions. Your pension ‘pot’ is separate from those of everyone else and so you will probably be able to make some decisions about where your money is invested if you want to. Any growth within the pension pot is tax-free, but the value of investments can increase or decrease.

The amount of money you have when you retire depends on how much has been paid in and how well the investments have performed. In most schemes when you retire you can take some of your pension as a tax-free lump sum. You can choose how to take the rest, for example as an income or as a further lump sum, but you may have to pay tax on it. You can find out more about your options on our website.

Once you have been auto-enrolled, the pension company will write to you with a welcome pack telling you everything you need to know about being a member of their scheme and how it works, from logging into your online account for the first time (most pension companies allow you to keep track of your pension pot online) to what happens to your money if you die.

Why have I not been automatically enrolled when I think I should have been?

It is possible for an employer to legitimately ‘postpone’ offering a pension scheme to their staff for up to three months, meaning that if you are with an employer for a very short period only, for example in a seasonal job, you might not be offered auto-enrolment, even if you are otherwise eligible.

Postponement can be used in various circumstances, for example:

• from the date an employee first becomes eligible for auto-enrolment (for example, when they turn 22),
• on the first day of employment

If your employer chooses to postpone you, then they should write to you and let you know. Please note that you can choose to opt in to the pension scheme during the postponement period.

If you still think that you should have been automatically enrolled into a workplace pension but have not been, ask your employer why. If you are not satisfied with the reason they give you, see Problems with auto-enrolment below.

My income varies each pay day: how will auto-enrolment apply to me?

Auto-enrolment applies to all employees that meet the criteria, including short-term, seasonal, temporary staff or other staff who are not on regular hours or incomes (for example fruit pickers, labourers, workers recruited in retail to cover peak periods).

Your income may vary, but if at any point, you earn more than the eligibility threshold for your pay period, your employer should auto-enrol you at that time (or after three months if they have decided to postpone you).

Once you have been enrolled, and assuming you do not opt out, your employer will then calculate pension contributions each time you are paid, in accordance with the percentage table. You should remember that the percentages only apply to qualifying earnings over £6,240 (or the appropriate amount for your pay period). If your income fluctuates, this may mean that in some pay periods you could earn enough for there to be pension contributions, and in other pay periods you will fall short and there will be none.

What if I am not currently eligible for auto-enrolment?

If you do not initially meet the eligibility criteria to be automatically enrolled, you might do at some stage in the future, for example when you have a birthday or if your earnings change. If you become eligible for automatic enrolment at a later date, your employer should enrol you at that point (or after three months if they decide to postpone you).

Alternatively, you can ask to join a workplace pension scheme, even if you are not entitled to be automatically enrolled. Your employer may have to pay into it on your behalf depending on whether you are a ‘non-eligible jobholder’ or an ‘entitled worker.’

• Non-eligible jobholders: for example those aged 16 to 74, earning from £6,240 (in 2023/24) to £10,000 or those aged 16 to 21 or state pension age to 74 and earning at over £10,000. You are entitled to opt in, with an employer contribution.
• Entitled workers: for example those earning under £6,240 (in 2023/24). You are entitled to join a scheme but are not entitled to an employer contribution if you do so.

I have more than one job – how does auto-enrolment affect me?

If you have more than one job then each of your employers will have to check whether you are eligible for that employment separately. This may mean that no employer needs to enrol you in a workplace pension scheme, although overall you may earn more than £10,000 per year.

On the other hand, you may be eligible in one but not the other, or both. If you are eligible in both, then you should be automatically enrolled in both workplace pension schemes (although you can decide to opt out). The contribution amounts involved are likely to be smaller than if you earned all your income from one job, because the first £6,240 of earnings in each employment are not included in the calculations.

Further information can be found on the MoneyHelper website.

What happens to my pension pot when I change jobs?

Your pension pot is entirely separate from your employment so when you leave a job your pension pot remains invested with the pension company. Your new job may use the same pension company, in which case you can continue to build your existing pot. Or your new employer may offer you a different pension scheme and you can contribute to this new scheme while the pot from your previous job remains invested as before.

It may be possible to combine the pension pots by transferring the pot from your old job into your new scheme. Before you do that you should check that both schemes will allow such transfers and what costs are involved. You can read more about transferring your pension on GOV.UK.

My employer has asked me whether I want to use a salary sacrifice scheme in conjunction with its pension scheme. What does this mean?

You can find out about using salary sacrifice, including a warning if you are a low-paid worker in a ‘relief at source’ scheme, on our separate page: Tax relief on your pension contributions.

I receive state benefits. If I join a pension scheme how will these be affected?

We cover this on our tax relief on pension contributions page.

We also look at the relationship between pension contributions and carer’s allowance in our disabled people and carers section.

What happens to my pension contributions when I am on maternity leave?

Assuming you are already in a pension scheme before you go on maternity leave, then your own pension contributions will usually be based on the pay you actually receive, for example, your statutory maternity pay (SMP). Your employer’s contributions will be based on your earnings before your maternity leave began. Employers are required to make contributions for the full 26-week ordinary maternity leave period. If you decide to extend your leave, the employer contributions must continue to the extent there is SMP or any other contractual income still being paid (this will usually only be up to 39 weeks).

You can find out more on the MoneyHelper website.

Problems with auto-enrolment

If you are concerned about the way your employer is dealing with automatic enrolment or managing your workplace pension, you can contact The Pensions Regulator using their whistleblowing service on their website.

Please note that it is possible for an employer to legitimately postpone offering a pension scheme to their staff for up to three months, meaning that if you are with an employer for a very short period only, for example in a seasonal job, you might not be offered auto-enrolment, even if you are otherwise eligible.

Where can I find more information?

See our tax basics section for a list of more sources of information on pensions.

Examples

Marcie

Marcie earns £220 per week. Neither Marcie (nor her employer) pay pension contributions on the first £120 of pay, thus they will each pay contributions based on £100 (£220 less £120) each week.

Richard

Richard (and his employer) normally pay pension contributions each month based on his salary of £2,500 (this means they actually only pay them on £1,980 as they do not pay them on the first £520 of pay). In one month, though, he has to work a lot of overtime because a colleague is ill and is paid an extra £1,750. That means he is paid £4,250 that month. No pension contributions are due on the amount he has earned below £520 or in excess of £4,189. Richard and his employer will each pay pension contributions on £3,669 that month.

Petro

Petro (and his employer) pay pension contributions each month based on his salary of £1,500. The first £520 of this is not counted so they each have to pay contributions based on £980 each month. In 2023/24, Petro will have to contribute 5% of that pay, assuming his employer pays the minimum contribution of 3%. The contribution Petro needs to pay is £49 per month. But the government pays part of that by giving him 20% tax relief on the amount he pays (£9.80). The actual cost to him is £39.20, but the full £49 goes into his pension pot, together with the sum paid by his employer, another £29.40.