What is auto-enrolment?

Every employer has to ensure that employees and other workers who qualify as 'eligible jobholders' are enrolled into a 'qualifying pension scheme'. The scheme must be set up in such a way that the jobholder joins automatically without the need to make any decisions at all.

There can be a waiting period of up to three months before jobholders are automatically enrolled. Jobholders must be formally told about this waiting period. Importantly, the notice must also explain that the jobholder has the right to opt in to the scheme before the automatic enrolment date.

Employers with final salary schemes will have to provide a minimum level of benefits. Employers with 'defined contribution' schemes, such as a group personal pension, will have to pay a minimum level of contribution. The actual amount payable will depend on the definition of pensionable pay for the pension scheme but will ultimately be 3% - 4% of pensionable payroll.

Jobholders who have been automatically enrolled have the right to opt-out of membership, by giving notice to the employer. If a member opts out within the legal time limit, their membership of the pension scheme must be cancelled from inception and all payments, including employer contributions, refunded. Every employer will have to administer this process and liaise with the trustees or scheme provider as appropriate.

Employers will have to register with the Pensions Regulator and provide details of how they have complied with their duties. They must do this within four months of initially completing the automatic enrolment process. Thereafter employers will have to re-register every three years.

Jobholders who are not members of a qualifying scheme will be entitled to opt-in to a qualifying scheme if they want to. When they do so, employers will have to arrange for them to start or restart active membership and commence payment of employer contributions for that member.

Employees and workers who do not qualify as jobholders because of low earnings will be entitled to join a pension scheme by giving a joining notice. If they do this, employers will have to arrange for them to start or restart active membership. However, employers will not have to make any employer contributions for these workers who opt-in.

Every three years, employers will have to automatically re-enrol any eligible jobholders who are not already members of their qualifying pension scheme. The exact date can be adjusted three months either side of the three-year anniversary. Any jobholder who opted out in the previous 12 months does not have to be re-enrolled.

Employers will have to support the whole process by providing information to jobholders and workers as required by regulations. This includes specific information to be given to jobholders when they are enrolled or re-enrolled and details of the options available to them.

Employers will have to keep records of the whole automatic enrolment process for at least six years. This will include information about their chosen qualifying schemes, the jobholders and workers who joined their scheme and associated paperwork such as opt-in and opt-out notices.