Accounting technology / Glossary / Pension auto-enrolment

What is pension auto-enrolment?

Definition

Pension auto-enrolment is the UK law that requires employers to put eligible workers into a workplace pension scheme automatically and pay contributions into it. A worker qualifies if they are aged between 22 and State Pension age, earn at least £10,000 a year and usually work in the UK. Workers can opt out after being enrolled.

Also calledautomatic enrolmentworkplace pensionAE

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Eligible workers: Age 22 to State Pension age, £10,000+
Minimum total: 8% (employer at least 3%)
Regulator: The Pensions Regulator

How pension auto-enrolment works

Employers assess every worker each pay period. Eligible jobholders must be enrolled; others, such as lower earners or those outside the age band, can ask to join, and the employer may have to contribute for some of them. The minimum total contribution is 8% of qualifying earnings, of which the employer must pay at least 3%, with the worker paying the rest, including tax relief. Workers who opt out within the first month get their contributions back, and employers must re-enrol eligible workers who opted out roughly every three years. Employers also complete a declaration of compliance with The Pensions Regulator, which enforces the duties and can issue fines. Payroll software assesses workers, deducts contributions, sends enrolment letters and passes contribution data to the pension provider each pay run.

Common questions

Who must be auto-enrolled?+

Workers aged between 22 and State Pension age who earn at least £10,000 a year and usually work in the UK. Others can ask to join and some must receive employer contributions if they do.

What are the minimum auto-enrolment contributions?+

8% of qualifying earnings in total, of which the employer pays at least 3%. The employee's share includes tax relief.

Can an employee opt out of auto-enrolment?+

Yes, after being enrolled. If they opt out within a month they get their contributions back. The employer must re-enrol them about every three years if they are still eligible.