Automatic enrolment for workplace pensions has helped many employees to start making provision for their retirement with employers and government also contributing to make a larger pension pot.
The law states that employers must automatically enrol workers into a workplace pension if they are aged between 22 and State Pension Age, earns more than minimum earning threshold. The minimum threshold is currently £10,000 and will remain the same in 2026-27. The employee must also work in the UK and not already be a member of a qualifying work pension scheme. Employees can opt-out of joining the pension scheme if they wish.
Under the rules, employers are also required to offer their workers access to a workplace pension when a change in their age or earnings makes them eligible. This must be done within 6 weeks of the day they meet the criteria.
Under the automatic enrolment rules the employer and the government also add money into the pension scheme. There are minimum contributions that must be made by employers and employees.
Both the employer and employee need to contribute. There is a minimum employer contribution of 3% and employee contribution of 4%. This means that contributions in total will be a minimum of 8%: 3% from the employer, 4% from the employee and an additional 1% tax relief. For example, if you pay £40, your employer adds £30, and you receive £10 in tax relief, a total of £80 goes into your pension.
In most automatic enrolment schemes, employees make contributions based on their total earnings between £6,240 (the lower qualifying earnings limit) and £50,270 (the upper qualifying earnings limit) a year before tax. This means that for many employees the 8% contribution rate will not be based on their full salary.
