Approximately every three years, your employer has a legal obligation to automatically re-enrol all eligible employees who are not in a workplace pension scheme. You’ll be re-enrolled even if you’ve previously left a scheme. This is to encourage you to save for your retirement. On the re-enrolment date, your employer must:
- check whether any employees who aren’t currently members of a scheme are eligible to be enrolled and enrol them if they are;
- start making contributions.
Who’ll be automatically re-enrolled?
You’ll be automatically re-enrolled if you’re not in a workplace pension scheme and you are:
- aged between 22 and State Pension age
- working in the UK
- earning £10,000 a year (£833 a month or £192 a week), or more, in a single job.
We’ll write to tell you if you’ve been re-enrolled, explain how it works and let you know what you need to do.
Can I opt out?
Yes. Once you’ve been automatically re-enrolled, you’ll have one month from when we write to you to opt out. We’ll explain how this works in our letter.
If you opt out by the deadline, your employer will refund your contributions through the payroll. If you miss the deadline, your contributions can’t be refunded. They’ll stay invested in your pension until you retire, or you transfer them to another pension provider.
After the opt out deadline, you can stop contributions at any time.
Can I still be enrolled even if I don’t qualify?
Yes. As long as you’re aged between 16 and 74, you can ask to join your workplace pension scheme. Your employer must put you into the scheme and ensure the correct contributions are paid for you.
How your pension contributions work
If you are enrolled, here’s a reminder of the minimum contribution rates you and your employer are required to pay for the 2023-2024 tax year:
- You contribute 5% of your qualifying earnings (the earnings that count towards pension contributions). The amount may go up or down, depending on how much you earn.
- Your employer contributes 3% of your qualifying earnings.
- So a total of 8% of your qualifying earnings is going into your pension.
If your employer pays a higher rate than 3%, your minimum rate may be lower than 5%.
The NOW: Pensions scheme is a net pay scheme, which means pension contributions come out of your pay before income tax is taken off.
Don’t miss out on future savings
Remember, the aim of re-enrolment is to help you build your pension savings. If you opt out:
- You miss out on your employer’s contribution – at least 3% of your qualifying earnings.
- If you’re a taxpayer you miss out on tax relief as you pay your pension contribution before tax is deducted.
- You don’t build up any more savings in your pension scheme.
This means you may be missing out on ‘free money’
For example, if you pay £75 into your pension, you’ll also save £15 that you’d otherwise pay as tax. Your employer will then add their £45, making a total contribution of £120 (Based on minimum employer and member contributions for a basic rate taxpayer).
Because your original £75 contribution only cost you £60, you’ve effectively doubled your pension contribution. That’s a great way to save!
Net pay top-up scheme for non-taxpayers
If you’re a tax-payer, you automatically get tax relief on your pension contributions at the highest rate that applies. If you don’t pay tax, you won’t benefit from this.
Although the government is taking steps to address this, NOW: Pensions is keen to ensure non-taxpayers don’t miss out. So, if you haven’t paid tax on any of your UK earnings in a tax year (April to April), you can ask us to top up your pension savings by the amount of tax relief you’ve missed out on for that year.
Check our website for more details: nowpensions.com/help-and-support/members/faqs/pension-basics/what-is-the-tax-top-up-scheme.