What is Automatic Enrolment for Employees?

Introduced in October 2012, automatic enrolment for employees is a government initiative, whereby every employer needs to contribute and automatically enrol eligible staff to a workplace pension scheme. Generally, employees also need to contribute to this scheme on which the government often provides tax relief.

This scheme is aimed at helping people to save money for their retirement. At first, this scheme was for some employers, but later in 2018, it applied to all employers in the UK. Remember, you’re an employer if you pay tax and NICs from your employee’s income.

According to a report by The Pensions Regular 2019, 1.4 million employers are fulfilling their automatic enrolment duties which has yielded 10 million employees to save in the workplace pension.

In this blog, we’ll explore how to qualify for automatic enrolment, how much you need to contribute, and how it works if you have two or more jobs.

Read on to find out!

How can I qualify for Automatic Enrolment?

Your employer will automatically enrol you if you fulfil the below conditions:

• You have reached stage pension age, which is 22 (calculate your state pension age here)
• You are working in the UK with a contract of employment or service contract
•  You’re earning above £10,000 per year (2021/22)

If you meet the eligibility criteria, your employer will inform you about it. If you’re self-employed and running a business through your account, you’re not eligible for automatic enrolment for employees.

How Much To Contribute?

Usually, a certain percentage of your qualified earnings is deducted as the pension amount. It includes your salary, wages, bonuses, commission, and statutory pay from your gross earnings. Currently, your employer will pay a minimum of 3% and you’ll be going to pay 5% from your earnings making a total of 8%.

You need to be aware that this percentage is applied to your qualified earnings between £6,240 and £50,270 a year (2021/22) depending upon how often you’re paid.

After the contribution, you’d often get tax relief on it. Your employer may also use different approaches like a net pay arrangement, where you may not get tax relief unless your income is over £12,570 (in 2021/22). Therefore, you should check what scheme your employer is using.

How Does It Work If You Have Two Jobs Or More?

In case you have two or more jobs, each job will be considered apart from the other for automatic enrolment purposes. It means that some jobs will enroll you to contribute to pension and some jobs won’t.

The employer will decide your eligibility for the pension scheme. If you qualify, you’ll be automatically enrolled in that pension scheme. However, you may opt-out, out if you don’t want to avail more than one pension scheme. You can enrol in more than one pension scheme as per your wish.

If you’re earning over £6,240 but below £10,000, you won’t be enrolled automatically. But you may ask to do so. In such a case, your employer will also contribute. On the contrary, if you earn below £6,240 in a year, you can still ask your employer to join a workplace pension scheme, but here the employer will not contribute.

Quick Wrap Up:

So, you have got enough information on automatic enrolment for employees. If you’re already enrolled in a workplace pension scheme, we advise you not to opt out as it means you are refusing the contribution of your employer to your pension sum. Your employer’s contribution to your workplace pension scheme is a kind of additional pay benefit that you get.

For this reason, this pension scheme is a great way to save for your retirement. However, there might be a few instances where opting out is a better option, like you’re facing unmanageable debts.