Employee on laptop

Employee Information

This page is designed for employees and will hopefully answer all your questions about auto enrolment from opting out and what happens when your situation changes, through to contributions and taxation.

Use the left-hand side contents table to navigate this page.

What Auto Enrolment Means For Employees

In order to get more people saving more money for their eventual retirement, the government introduced new laws requiring that all U.K. employers put their qualifying employees into workplace pension schemes. This initiative is known as Auto Enrolment.

Whilst occupational/workplace pension schemes have been around for some time and have always been dependent on employees opting to join, auto enrolment requires employers to automatically enrol (hence it's name) employees into a scheme and it is up to the worker to opt themselves out (should they not wish to remain in the pension scheme).

It is the employer's responsibility to inform their workers about auto enrolment and how it will affect them. They are legally required to automatically enrol all eligible employees into a qualifying workplace pension by a set deadline known as a 'staging date'.

Employees cannot automatically enrol themselves into a workplace pension scheme. Employees can choose to remain in the scheme once they have been enrolled or to opt out. Opting out cannot happen until after employees have been enrolled by their employer.

See more on opting out further down the page.

Video: Your Workplace Pension Explained In Under Two And A Half Minutes Minutes

This short yet concise video explains how the new government legislation, auto enrolment, works and how it will affect employees.

Transcript: Your Workplace Pension Explained, In Under Two And A Half Minutes

Your workplace pension explained, in under two minutes. The UK government found that too few workers were putting money into a pension.

The solution?

New laws requiring that all U.K. employers "automatically enrol" their qualifying employees into a workplace pension scheme.

What is a "qualifying employee"?

A qualifying employee is:

  • Any employee of any nationality who ordinarily works in the UK,
  • Who is 22 and over but under the state pension age,
  • and who earns more than £10,000.00 a year.

Employees falling outside of this may also elect to join the workplace pension voluntarily.

Can employees opt out?

Employers must not encourage or force employees to opt out. However, employees may choose to opt out on their own.

What's in it for the employee?

Initially, employees must contribute 1% of their pre tax pay to the pension. Their employer will then top that up by 1.%. Total pension contribution: 2.0% of the employee's gross salary.

So, initially for every pound of net pay that an employee puts into their pension, another 1 pound 50 will go in on top, for free, from their employer and from the government (in the form of a tax credit).

In early 2018, the employer's contribution will increase to 2.0%, the employee's to 3.0 (which includes the government's tax top up of 0.6%). Total pension contribution: 5.0% of the employee's gross salary.

In early 2019, the employer's contribution will be 3.0%, the employee's 5.0% (which includes the government's tax top up 1.0%). Total pension contribution: 8.0% of the employee's gross salary.

What does it cost the employee?

The government has passed laws to ensure that workplace pension fees are fair. Employees will typically pays a small percentage fee, based on the amount of money in their pension.

What's next for you?

Your employer must set up a workplace pension and assess if you qualify. Whether you qualify or not, your employer is required to keep you informed and tell you about the next steps for you.

What if you have questions?

Please visit https://www.autoenrolment.co.uk/employee-information

Or contact the person on screen now:

Employee's Booklet

This booklet is designed for employees and is aimed to provide information about auto enrolment and how it works with Smart Pension. In here you will find:

  • What is auto enrolment and why it is happening
  • Your employer's obligations
  • Minimum contribution levels for you and your employer up to 2019
  • The Employee Portal - how you can manage your own pension
  • Your investment options
  • Why Smart Pension - MAF accreditation
  • Links to helpful resources
  • Smart Pension contact information

Members only

For employee members who have already joined Smart Pension via their employer/company, the member's Pension Scheme Booklet will provide you with information about your membership in the AutoEnrolment.co.uk Master Trust Scheme.

General Employee FAQs and More Information

Below you will find answers to the most commonly asked questions by general employees looking for more information on auto enrolment. Members - employees who have already joined the Smart Pension scheme - will also find some of the information here useful such as:

1. Opting In Or Opting Out

Opt In Or Opt Out

Are you thinking of opting out of auto enrolment? Here are a few things to think about before you do.

Click here to view a Polish language version of this article.

Opting Out

What does 'opt out' mean?

You can decide to leave your workplace pension scheme at any time. If you were automatically enrolled, leaving the scheme within 1 month of the date your employer put you into your workplace scheme (from when the joining assessment email is issued) is called opting out. If you opt out, you will be treated as if you had not been put in the scheme. Any money you have paid in will be paid back to you.

If you leave the scheme after 1 month (this is known as ceasing your membership), you may not be able to get back any payments you have made. This depends on the pension scheme's rules and will vary from one provider to another. Usually they will stay in your pension pot until you choose to open it to take an income.

Under the rules of the Smart Pension scheme, you will not receive a refund on any contributions paid in previously.

When can you opt out?

You have 1 month from being auto enrolled to opt out.

How do you opt out?

You can opt out of your pension only once your employer has assessed if you qualify and then automatically enrolled you into your workplace pension scheme if you do qualify. Your employer is required by law to inform you if you have been enrolled and will let you know how to opt out.

If your employer chooses the Smart Pension auto enrolment platform, all these documents are generated automatically and you can easily opt out online by logging into your member portal. Once signed in, select the menu icon at the top right, select ' Profile Details' and then 'Manage Membership'.

There's a postponement period. Can I still opt-in or opt-out?

An employer may choose to postpone assessing their workers for enrolment. A worker has the right to opt-in during the postponement period. A worker cannot opt out as the scheme has not started yet. You cannot opt out of something that has not yet begun. When opting in, all an employer has to do is check the level of qualifying earnings of the worker to determine whether the worker is a jobholder or entitled worker.

I have previously opted out, can I opt in?

If you previously chose to opt out you can ask to opt in to the scheme again. If this is within 12 months of your decision to opt-out your employer does not have to accept your request but they may do so.

I have not been automatically enrolled by my employer, can I still choose to opt in?

Yes you can. Depending on how much you earn and how old you are, your employer may have to pay into your pension account too.

2. Age vs Earnings - Changes To Your Situation In The Future

Employees might find that they were once not eligible for auto enrolment due to their age and/or their earnings but that situation can change at some point in the future.

What happens if you start to earn more than £10,000.00 (£833.00 a month, £192.00 per week) in the future?

If you start to earn more than the minimum £10,000.00 a year (currently £833.00 per month or £192.00 per week) you will be automatically enrolled into our workplace pension scheme, so long as you are aged 22 or over, are under State Pension age and work or usually work in the UK.

If this happens, you will receive an email notifying you that you will be auto enrolled. You can opt out of the scheme if you want to, but if you stay in you will have your own pension which you get when you retire. The Company and you will pay into it every month.

If you are currently under the age of 22, what happens when you turn 22?

If you are earning more than the minimum (currently £10,000.00 a year, £833.00 a month or £192.00 per week) when you reach 22, you will be automatically enrolled into our workplace pension scheme. You will receive an email once you are 22, giving you all the information you need. You can opt out of the scheme if you want to, but if you stay in you will have your own pension which you get when you retire. The Company and you will pay into it every month.

If you're under the age of 22 or over the state pension age and earn more than £10,000.00 a year (£833.00 a month or £192.00 per week)?

You are classed a non-eligible employee and you will not be automatically enrolled but you will have the right to join our workplace pension scheme if you want.

3. Leaving/Moving Jobs

job leaver

Leaving your job and moving to a new one

As long as you still meet the qualifying criteria, you will be automatically enrolled into the new job's pension scheme. You can also transfer your current workplace pension accrued benefits to your new employer's chosen pension provider and build as one. If you leave it where it is then you cannot put any further contributions into it.

If you have more than one job

If you meet the qualifying criteria, you will be automatically enrolled into your employer's pension scheme. This could mean enrolment into more than one scheme if you meet the requirements for both. If you don't wish to manage two or more pension schemes, you have the right to opt-out.

4. Your Contributions

See section 5. Taxation and Your Pension Scheme for information about how tax relief is obtained on your Smart Pension contributions.

What are the minimum contribution levels for auto enrolment?

Under the auto enrolment regulations, the minimum contribution level is presently 5% of qualifying earnings, of which the employer must contribute a minimum of 2%. From 6 April 2019 contributions will rise to 8% of qualifying earnings, of which the employer must contribute a minimum of 3%. This is known as contribution phasing* . You can increase the percentage you pay into the Scheme if you wish, either by logging into your member portal or telling your employer's pension administrator.

* Click here to see our auto enrolment contributions infographic.

Are pension contributions payable on London Weighting?

Yes – London Weighting forms part of the calculation for qualifying earnings for automatic enrolment purposes. This is also referred to as Large Town Allowance as it is available in many towns and not just London. Please refer our Employee Classifications & Qualifying Earnings page for more information.

Is there a limit on what you can contribute to the workplace pension scheme?

You can increase the amount you put in if you want, up to 100% of your earnings subject to the Annual Allowance of £40,000. This maximum would reduce to £4,000 if you have drawn benefits under the Small Fund retirement options available to those over age 55.

5. Taxation and Your Pension Scheme

tax relief

Understanding Tax Relief

If part of your contribution comes from income below taxable levels, no tax relief will currently be available on that part. Please refer to your payroll administrator or professional adviser for assistance if you want an explanation of the tax rules applicable to your circumstances.

There are two HMRC approved methods for paying contributions into a Pension Scheme:

1. Net Pay Arrangement

The current method of paying contributions into Smart Pension is under HMRC's 'Net Pay Arrangement'. Despite its somewhat confusing name following the definition set out by HM Revenue & Customs, this arrangement ensures that 100% tax relief is achieved via payroll. This is because all contributions are paid over to Smart Pension 'Gross' (with no tax taken), thus removing the need to claim the higher and additional relief via Self-Assessment.

Note – a Net Pay Arrangement will not provide a 20% tax credit to employees earning below their relevant personal allowance for income tax.

2. Relief At Source

An alternative method for paying contributions is under HMRC's 'Relief at Source' arrangement, where the payroll calculates 20% tax before employee contributions are paid to the scheme. As this employee contribution gets paid to the pension 'Net' of 20% tax (after tax has been taken), the provider must reclaim this 20% tax from HMRC. Please note that Smart Pension does not currently offer this method of claiming tax relief.

Note – employees who pay tax at the higher and additional rates will be required to complete a Self-Assessment to claim their full tax relief.

For more information please visit: http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm04200040.htm

National Insurance (Social Security)

Both employee and employer pension contributions are exempt from tax, however, under National Insurance this is not the case:

  • Employer Contribution – Exempt (NI relief can be obtained)
  • Employee Contribution – Not Exempt (NI Relief cannot be obtained)

Your Pension Scheme

The Autoenrolment.co.uk Master Trust (your pension scheme) takes contributions** from you and your employer to pay into your pension pot. These contributions are received from your employer without deduction of income tax via 'net pay arrangement'. By not charging income tax as usual on these amounts, the Government is also contributing to your pension pot (although you will be charged income tax when you take income from your pension after retirement).

How is income tax relief obtained on your Smart Pension contributions?

As tax relief is obtained through the government top up, an employee's minimum contribution of 1% is broken down to a contribution of 0.8% from the employee with the government topping up the additional 0.2% to make the full 1%. The contributions are taken from the gross salary (before tax is deducted) - allowing for the tax relief.

For most members of the Smart Pension scheme this net pay arrangement gives members full tax relief, but scheme members who would not normally pay income tax on all their contributions will not get that tax relief (because part or all of the income they contributed was below the starting point for income tax). However, this doesn't affect the amount that is paid into your pension and you'll continue to benefit from the money that your employer pays in.

** Click here to learn more about the legal required minimum contribution levels (including the government's tax relief top-up) and planned pension contribution increases (contribution phasing).

7. Employee Support & FAQs

Our Employee Support & FAQs page contains answers to the most frequently asked questions and common topic areas raised by employee members. It is designed for employees (those of companies who have engaged Smart Pension to help them provide a workplace pension) who may have support questions or issues that need resolving such as:

  • if you are struggling to log into your Smart Pension workplace pension account;
  • if you are struggling to access your messages in your account inbox;
  • wanting to opt out (once you have been assessed);
  • understanding your annual statement;
  • finding out how to initiate a pension transfer;
  • what your options are when it comes to retirement.

To access our Employee Support & FAQs, click the button below.

Employee Support & FAQs

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