Auto enrolment pensions for employees

In 2012 new rules came into effect which require every employer in the UK to set up a pension scheme and automatically enrol their staff into it.

The government has insisted on a minimum level of contributions that must be paid into these new workplace pensions.

Your employer will have to contribute some of this minimum contribution, and employees will have to make up the rest.

We have provided some information to help you understand these new rules and how they affect you. You should read these carefully, and ask your employer or HR department if you have any questions about your specific scheme.

Why are auto enrolment pensions important?

It’s important to save money for the future, and a pension is basically a moneybox wrapped up in some special tax rules.

You might now have been interested in pensions before, but auto enrolment represents a great opportunity to get to grips with your retirement savings and take control of your future income.

How do auto enrolment pension schemes work?

 

Auto enrolment pension schemes work a little differently to other group pension arrangements you might be familiar with, but really there is nothing complicated about them. It’s simply that the process and some of the terminology might be unfamiliar.

You can find our more about the steps involved and how this will affect you by using the menu above. These are a guide to the auto enrolment process. If you are already a member of a pension scheme you should refer to your own company’s HR department for details of your own scheme as these can vary from firm to firm.

Even if you have never cared about pensions in the past, and even if you are not interested now, you have a responsibility to look after your own financial future.

BBi Financial Planning are experts in providing bespoke personal financial advice, but we can’t advise everyone. If we could, we would tell everyone to start by making a budget and planning for the future.

Auto enrolment is your opportunity to plan for your future.

Auto enrolment pensions and your responsibilities

 

We understand that many people find pensions boring, but pensions are the most tax-efficient way to save for your future. (We understand that the phrase ‘tax-efficient’ is not going to have you dancing in the streets either).

The new auto enrolment rules mean that for the first time your employer is required by law to contribute to a pension scheme that you will own. If you are automatically enrolled you have the right to opt out and get your money back (if you act quickly enough) but you should make sure you consider your choice carefully.

If you’re not going to look out for your own future, who is?

Auto enrolment pensions and your responsibilities

 

We understand that many people find pensions boring, but pensions are the most tax-efficient way to save for your future. (We understand that the phrase ‘tax-efficient’ is not going to have you dancing in the streets either).

The new auto enrolment rules mean that for the first time your employer is required by law to contribute to a pension scheme that you will own. If you are automatically enrolled you have the right to opt out and get your money back (if you act quickly enough) but you should make sure you consider your choice carefully.

If you’re not going to look out for your own future, who is?

How assessments work for auto enrolment

First of all your employer will assess you to see if you are an eligible worker, a non-eligible worker, or an entitled worker.

This exercise is to see if you will be automatically enrolled into the pension scheme and have contributions deducted from your pay.

The definitions of each of these terms is below.

Eligible workers

Earn above £10,000 per annum and are aged between 22 and the State Pension Age (this will be based on your year of birth).

Non-eligible jobholders

Earn between £5,824 and £10,000 per annum, and are aged between 16-21 or State Pension Age-74.

Entitled workers

Earn less than £5,824 per annum and are aged between 16-74 years old.

If you are not automatically enrolled you can still join your employer’s scheme, and if you are enrolled you are free to leave.

How automatic enrolment works

Depending on the results of your assessment you might be enrolled into the pension scheme automatically.

If you are eligible, you will be enrolled automatically and your employer will have to contribute on your behalf.

If you are non-eligible, you will not join automatically but you can if you choose. If you choose to join your employer must make contributions on your behalf.

If you are entitled you will not join automatically but you can if you choose. If you choose join your employer is not required to make contributions on your behalf.

These are only the automatic outcomes of your assessment.

You still have a choice whether to remain in the scheme or join it if you were not enrolled.


Opting in and opting out of your auto enrolment pension

Regardless of the results of the assessment the choice to remain in the pension scheme if you are added automatically, or join it if you are not, is yours.

If you are enrolled and you don’t want to be in the scheme you can opt out. You will need to do this in writing, and depending on the pension scheme arranged by your employer, you may be able to do this online. If you opt out then any money deducted from your salary will be returned to you.

Opting out is not the same thing as leaving the scheme. Opting out applies only to the first month following your enrolment. You can only have a refund if you opt out in the first month. If you leave the scheme after this time you will not get a refund. 

If you are not automatically enrolled and you want to join the scheme you can opt in. Your employer may be obliged to contribute to your pension but this will depend on whether you are assessed as a non-eligible or entitled worker.