Opted in to a workplace pension? What it means
How pension auto-enrolment works and how much you, your employer and the Government will contribute
Auto-enrolment means your employer must put most employees into a workplace pension — and crucially, pay into it too. Add in Government tax relief and it’s one of the easiest ways to build your retirement income. Opting out usually means walking away from FREE cash. Here’s what you need to know, whether you’ll be enrolled and how much you’ll get.
What is pension auto-enrolment?
If you work for an employer, they must usually provide a workplace pension scheme that you're included in – this is called ‘pension auto-enrolment’.
As long as you meet a few key criteria outlined below, it'll be the responsibility of your employer to make sure you're included in the scheme.
A workplace pension is a powerful way to build retirement savings because when you contribute, your employer and the Government do too. So although there is an option to opt out – we explain below why this generally isn’t a good idea.
Am I eligible to be auto-enrolled?
You'll be included in your employer's pension scheme if you're:
-
Aged between 22 and State Pension age (currently 66, though increasing to 67 and eventually 68)
-
Earning more than £10,000 from one job (equivalent to £192 a week or £833 a month)
-
Working in the UK
You won’t be auto-enrolled if you're self-employed, a sole director with no staff, or fall under certain exclusions.
If you earn less than £10,000 but more than £6,240 (£520 a month or £120 a week), you can also ask to join your employer's auto-enrolment pension scheme – your employer can't refuse and must also contribute.
The Government is considering ways to get more people into auto-enrolment, including lowering the qualifying age to 18, starting contributions from the first £1 earned and bringing the self-employed into auto-enrolment – but there is no set date for when this will come into effect.
How do I know if I’ve been auto-enrolled?
Your employer must write to you when you’ve been automatically enrolled into their workplace pension scheme and tell you the following:
-
The date they added you to the pension scheme
-
The type of pension scheme and who runs it
-
How much they’ll contribute and how much you’ll have to pay in
-
How to leave the scheme, if you want to
-
How tax relief applies to you
If you have already been enrolled, you'll also see deductions from your pension contributions on your payslip.
Your employer usually doesn't have to enrol you automatically if you don't meet the criteria explained above or if any of the following apply:
-
You've already given notice to your employer that you're leaving your job, or it's given you notice.
-
You have evidence of your 'lifetime allowance protection' (for example, a certificate from HMRC).
-
You've already taken a pension arranged through your employer.
-
You get a one-off payment from a workplace pension scheme that's closed (a 'winding-up lump sum'), and then leave and rejoin the same company within 12 months of getting the payment.
-
More than 12 months before your employer's auto-enrolment start date, you left ('opted out' of) a pension arranged through your employer.
-
You're from another European Union member state and are in an EU cross-border pension scheme.
-
You're in a limited liability partnership.
-
You're a director without an employment contract and employ at least one other person in your company.
However, you can usually still join the pension scheme if you want to – your employer can't refuse.
In addition to this, if you have more than one job, but earn less than £10,000 a year in each of them, you'll need to actively request to opt in, as although your total income is more than the auto-enrolment threshold, you're assessed by each employer separately.
Who won’t be automatically enrolled?
How to calculate auto-enrolment pension contributions
When you're auto-enrolled, a minimum of 8% of your qualifying earnings must go into your pension. This amount is split between you and your employer, so you're not paying all that yourself.
Your employer must contribute a minimum of 3% (though some will contribute more). That means:
If your employer is putting in the minimum 3% – you'd need to contribute 5% to get to the 8% total. In reality, this would mean 4% from you, as you'll usually get 1% in tax relief from Government.
If your employer is putting in more than the minimum, say 4% – you'd only need to contribute a further 4% to get to the 8% total. In reality, this would mean 3% from you, as you'll usually get 1% in tax relief from Government.
Because of your employer's contribution and the tax relief you'll get, that 8% total contribution could work out costing you less than you think it will.
What are 'qualifying earnings'?
Auto-enrolment contributions aren’t based on your full salary. Instead, they’re worked out using what are called qualifying earnings — the portion of your pre-tax employment income between £6,240 and £50,270. Here are some examples of how it works:
Earn £25,000 and your qualifying earnings will be £18,760 (£25,000 minus £6,240). That means a minimum of £1,501 will be paid into your workplace pension in total (8% of £18,760 qualifying earnings).
Earn £50,270 and your qualifying earnings will be £44,030 (£50,270 minus £6,240). The total minimum contribution rises to £3,522 (8% of £44,030 qualifying earnings).
Earn more than £50,270, for example, £55,000, and the minimum contribution won’t keep increasing. The 8% is still calculated only on earnings between £6,240 and £50,270, so the total minimum stays at £3,522.
It's worth noting though that lots of employers have more generous schemes and may base their contributions on full earnings, meaning they'll pay more into your pension.
Employers can also set higher employee contribution rates than the auto-enrolment minimum, so you could end up paying more. But employers can't set the contribution rate so high that it acts as a deterrent for employees to contribute – if this happens, it may be investigated by the Pensions Regulator.
Money Helper has a workplace pension contribution calculator which will help you work out how much you and your employer will typically pay.
More than a million low-paid people are currently denied tax relief on their pension contributions because of the way their workplace pension scheme operates. Where the scheme is a 'group personal pension', even non-taxpayers (those earning less than the £12,570 personal allowance) receive a basic-rate tax top-up on their contributions.
By contrast, most public sector and 'trust-based' occupational pension schemes only give tax relief to people earning over the £12,570 personal allowance. An estimated 1.2 million low earners – mostly women – in these 'net pay' schemes are denied millions in tax relief every year on their pension contributions.
From 2024-25, anyone making pension contributions was able to claim a tax relief top-up of an average of £53 a year. The first top-up payments will be made in the 2025-26 tax year. They'll be be made directly to those eligible and are taxable as income.
How does the Government’s contribution work?
Most people receive tax relief from the Government on their pension contributions at your usual rate of income tax – 20%, 40% or 45%.
That means to get £100 put into a pension, a basic-rate taxpayer needs to pay in only £80. This is because the Government then adds £20 to the pension pot. Higher-rate taxpayers need to pay £60 to get £100, and top-rate taxpayers £55.
This tax relief, when coupled with your employer's contribution, means that when you contribute 4% of your qualifying earnings, your contribution is effectively doubled to get to the minimum 8% (1% Government and 3% employer).
Here's an example of how it would work for someone earning £35,000 a year – so that's £28,760 of qualifying earnings (£35,000 minus £6,240):
-
£1,438 of total employee contributions (5%) – that's £1,150.40 from take-home pay with £287.60 added by Government in tax relief.
-
£862.80 of employer contributions (3%).
-
£2,300.80 a year in total goes into the pension.
Some firms will claim back tax relief for higher earners automatically, but many won't – which means you'll have to claim the extra 20% or 25% via a self-assessment tax return. If you don't normally fill in a tax return, call or write to HM Revenue & Customs (HMRC).
If you can afford to, then definitely consider it – especially if your employer will match your contribution, in which case it's essentially a pay rise.
However, weigh this up against any payments you're making into a private pension to determine how much you want to pay in and can afford.
Salary sacrifice is a scheme that allows you to 'give up' some of your salary in exchange for your employer paying the difference into your pension.
Doing it that way means you won't pay income tax or NI on the amount you sacrifice via the scheme (in addition to any tax relief you're entitled to). It usually results in a little more in your take-home pay.
Is it worth paying more than the minimum into my pension?
Should I contribute my pension through salary sacrifice?
How do I opt out of auto-enrolment?
Auto-enrolment is like a hidden pay rise – so for most people it's worth having. It's worth thinking of auto-enrolment as a long-term gain for your retirement.
That said, there are some circumstances where opting out (or reducing contributions if your firm allows it) does make sense, including...
If you've got very expensive debts, for example, payday loans or bank charges for busting your overdraft limit. Here it's likely worth clearing these before you start to contribute to your pension. Then opt back into auto-enrolment afterwards.
If you're near retirement and have low savings. There is a chance that having a bigger pension pot could reduce your benefits, but this is a rare scenario. You can use our 10-minute Universal Credit and benefit checker or speak to Citizens Advice to find out.
If you have other high value or complex pension arrangements, it's worth speaking to an independent financial adviser. If you don't have one, speak to the Government's Pension Wise service, which offers guidance for over-50s on what to do with their pensions.
Note, if you opt out within one month of being enrolled, your contributions are refunded in full. After that, they stay in your pension pot.
If you opt out of your workplace pension, your employer must automatically re-enrol you every three years, as long as you're still eligible. Your employer will write to you to let you know you've been auto-enrolled again, and you'll have one calendar month to opt out again if you choose to.
Do I have to opt out every year?
FAQs
No. Auto-enrolment is designed to get everyone who isn't already paying into a workplace pension scheme to do so.
What scheme you'll be signed up to is the decision of your employer, which means if you're already in a workplace pension scheme you could be in a different scheme from your colleagues who are being auto-enrolled (although usually it will be the same scheme).
Your workplace pension belongs to you and it'll still be yours when you reach pensionable age. However, although you'll be able to join a workplace pension scheme with a new employer, you won't necessarily be able to pay into your old pension scheme, or combine your old and new pension schemes. To find out, you'll have to contact your pension provider.
Auto-enrolment applies to those who are employed, but if you're self-employed it doesn't necessarily mean you'll be excluded, eg, 'personal service workers' can be auto-enrolled. But who can be classified as such a worker is a subject of debate.
Yet the self-employed can always start their own saving for retirement through a personal pension. They can also join NEST, the National Employment Savings Trust, a workplace pension scheme set up by the Government.
If you're under 40, there's another option open to you – see the Lifetime ISA question below for more.
Any pension contributions you and your employer make will be held with the pension provider – not your employer. If your employer goes bust, your pension fund will be ring-fenced, so your retirement savings won't disappear.
If your pension provider goes bust, you also have protection – see our pension need-to-knows for more.
Not at all – you can get both. Auto-enrolment is the equivalent of a pay rise – not something you'd throw away lightly. But Lifetime ISAs – available to those aged between 18 and 39 – allow you to save for retirement (accessing the cash at 60) with the benefit of a 25% state bonus – a £1 top-up for every £4 you save.
You can read more in our Lifetime ISAs guide.
What happens if I'm already paying into my company's pension scheme – will I end up having to pay into two pensions?
What happens to my pension if I change jobs?
I'm self-employed – why aren't I getting an auto-enrolment pension?
What happens if my employer goes bust?
Does this stop me getting a Lifetime ISA?
State Pension: Full lowdown including how to boost it.
Pension need-to-knows: The key points for retirement income.
Cheapest SIPPs: Take control of your own retirement saving.
Share this guide?
