When a member opts out of the NOW: Pensions scheme, they may be eligible for a refund. This will depend on when they opted out. Employees who are auto enrolled will either have an opt out window from when they can choose to opt out or if the date is after the opt out window, they may be eligible for a short service refund if they joined before the 1 October 2015.
Opting out within the opt out window
The government legislation states that every employee who is categorised as a jobholder has the option to opt out within one calendar month after being auto enrolled into a pension scheme. The employee who wants to opt out must give an opt out notice to their employer within one month from the later of:
- The date they became an active member of the scheme
- The date they were given the required statutory enrolment information
If an employee opts out within the opt out window then the employer has to reverse the auto enrolment and put the employee in the same position as they would have been had they never been enrolled. This means that employees will have their contributions refunded via their pay by you the employer and you also get back your part of the contributions from the provider (if they have already been collected from you).
NOW: Pensions won’t collect contributions until after the opt out window has closed. This gives you the control and flexibility to manage the refund process internally. If your employee opts out then confirmation will need to be sent to them. NOW: Pensions can issue the confirmation for you along with other statutory communications once an employee becomes a member.
Following opt out confirmation you will need to process and pay back the cont ributions collected in your next payroll cycle. This must be paid within one month from the date you receive the opt out notice or the next available payroll run after you were given notice. Your payroll software should be set up to help you manage opt out refunds. If it is not, then please contact your payroll software provider.
Once an employee’s opt out window has closed we will collect all of their contributions since they joined the scheme.
Short service refund
A member of the NOW: Pension scheme may be eligible for a short service refund. The law has changed and therefore a refund will depend on when an employee joined the scheme.
Employees who joined after 1 October 2015
Due to changes in legislation, employees who joined a workplace pension scheme after 1 October 2015 and have passed their opt out window of one calendar month will no longer be entitled to a refund and the monies will remain invested for their benefit. Employees can choose to transfer their pension pot to another scheme at any time. NOW: Pensions does not charge for transfers.
Employees who joined before the 1 October 2015
If an employee joined a workplace pension scheme before 1 October 2015 they may be eligible for a short service refund. However, it should be noted that a short service refund only relates to the employee contributions and will be subject to tax.