The Government scheme called Automatic enrolment (Auto Enrolment or AE) requires all employers to enrol eligible workers into a workplace pension scheme. Official information is given by the Pensions Regulator which provides very useful information and should be reviewed by all employers.
Eligible employees cannot opt out before joining the scheme. Opting out means the employee choosing to leave the pension scheme within one month of being automatically enrolled, this is a legal right for eligible employees. Employers must never encourage employees to opt out.
Key points
To opt out, employees must complete and return an official Opt-Out Notice provided by your pension scheme
- Employees cannot opt out in advance. They must wait until you have been enrolled before submitting the opt-out request. If they opt out within the one-month window, it will be treated as though they were never a member of the scheme
- If they opt out within one month of being enrolled, any contributions already made will be refunded in full
- If they opt out after one month, contributions will usually remain in their pension pot until they can draw pension benefits (currently 55 or over)
- Employers are legally required to re-enrol eligible employees into the pension scheme approximately every three years. Employee may choose to opt out again at that time
- Some pension providers allow employees to complete the opt-out process electronically. Once submitted, the opt-out will remain valid for three years, after which the employer must re-enrol if still eligible
- By opting out, the employee may miss out on valuable retirement benefits, including:
- Employer pension contributions
- Tax relief added by the government
- Compound growth of on pension savings over time
If you would like to discuss this in more detail relating to your business, please feel free to book a free online meeting.
