The Compendium

A Comprehensive Companion for All in the Insolvency and Restructuring Profession

Automatic Enrolment

All employers in the United Kingdom must provide a workplace pension scheme. This is called ‘automatic enrolment’.

An employer must automatically enrol each employee into a pension scheme and make contributions to their pension if all of the following apply: if they are an eligible ‘job-holder’. In addition, other non-eligible jobholders or entitled workers have the right to join the scheme if they want to.

‘Eligible job-holders/workers’ are those who are:

  • aged 22 to state pension age;
  • working in the United Kingdom under a contract of employment (or under a contract to provide work or services as part of someone else’s business, that cannot delegated to someone else; such people are known as ’workers’ for employment law purposes);
  • earning over £10,000 a year (2022/23).

    • Company directors are eligible for automatic enrolment in certain circumstances. If a director has an employment contract, and at least one other member of staff – who can be another director – also has an employment contract, they all need to be assessed for automatic enrolment.

    A percentage of ‘qualifying earnings’ has to be put into the pension each pay day. Qualifying earnings include wages or salary, bonuses, commission as well as other items, such as statutory pay, before any tax or National Insurance contributions are deducted.

    From the date an employee is automatically enrolled, they will have a month to choose to ‘opt out’; contributions made during this period should be refunded. If they opt out after a month, the contributions they have already made will usually have to remain in their pension pot.

    Therefore if an employee does want to opt out, it makes sense to do this as early as possible. If they opt out, they can ask to re-join the scheme at a later date, but their employer may only allow them to do this once every 12 months.

    Even if they do not ask to re-join, their employer will normally put them back into a scheme every three years. This is called ‘re-enrolment’.

    Auto-enrolment does not apply to those who are self-employed.