Useful Information
Automatic Enrolment
The Government’s initiative to encourage people to save for their retirement resulted in the introduction of automatic enrolment. This means that employers must automatically enter their employees into a qualifying pension scheme when their employment starts, or after a waiting period of up to three months. An employee can then opt out if they do not wish to be a member of the scheme, but will be re-enrolled automatically approximately every three years.
Automatic enrolment currently applies to all workers who:
- are not already in a workplace pension scheme;
- are aged between 22 years and State pension age;
- earn more than the minimum earnings threshold of £10,000 a year; and
- work in the United Kingdom.
For defined contribution (DC) pension schemes that are used for automatic enrolment, the Government has set a minimum level of contributions that must be paid towards the member’s pension. The contributions are a percentage of the employee’s qualifying earnings, which are annual earnings between £6,240 and £50,270 (for the 2026/27 tax year). The minimum level of contributions that must be paid is 8% of qualifying earnings in total, of which at least 3% must be paid by the employer.
If they wish, employers may instead choose to meet alternative minimum contribution requirements (again, set by the Government), which are intended to allow for definitions of pensionable pay that are not consistent with qualifying earnings.
The Government has announced plans to extend automatic enrolment in the future. Proposed changes include lowering the age for automatic enrolment from 22 to 18 and removing the lower qualifying earnings limit, so that pension contributions would be calculated from the first £1 of earnings. Legislation giving the Government the power to introduce these changes was passed in 2023. However, the changes have not yet been implemented and no firm timetable for their introduction has been confirmed. Further consultation and regulations are expected before the changes take effect.
The National Employee Savings Trust (Nest)
If an employer does not have its own qualifying workplace pension scheme, it may choose to use Nest (the National Employment Savings Trust), a workplace pension scheme established by the Government to support automatic enrolment.
Nest was introduced in 2012. The minimum contribution requirements are as set out above. Employees are generally required to make up the difference between the employer contribution and the total minimum contribution. Employers may choose to pay more than the minimum required, in which case employees' contributions may be lower while still meeting the overall minimum contribution requirement.
Where an employer uses Nest for automatic enrolment, eligible employees will normally be automatically enrolled unless they choose to opt out or are already active members of a qualifying workplace pension arrangement.
For more information, please visit the Nest website at www.nestpensions.org.uk.