Automatic enrolment, often simply termed "auto-enrolment," mandates all UK employers to enroll their eligible employees into a workplace pension scheme. This initiative ensures that employees aged over 22 and meeting certain criteria receive a pension provision from their employer.
The sole exception applies to Company Directors without formal employment contracts. In such cases, auto-enrolment cannot be executed without a contractual employment agreement in place.
Introduction of Auto-enrolmentThe auto-enrolment initiative kicked off in 2012, initially targeting the largest corporations before gradually extending to encompass all eligible employees by February 2018. This phased introduction aimed to bridge the pension provision gap, ensuring individuals did not miss out on pension benefits either due to lack of employer offerings or personal choice to opt out.
Eligibility Criteria
- Age: Must be over 22 years
- Annual Earnings: Must exceed £10,000
- Employment Status: Must be working within the UK
Contribution Levels:Your contribution to the workplace pension is calculated based on your "qualifying earnings," which are your gross earnings between £6,240 and £50,270 for the tax year 2023/24. This range is before any deductions for Income Tax and National Insurance.
For precise contribution percentages and a deeper understanding of how much you'll be contributing to your pension under auto-enrolment, visiting the Pension Advisory Service website is recommended. This resource provides detailed insights into the specific percentages of earnings that you and your employer are required to contribute towards your pension scheme.
Contribution Rates Since 6 April 2019
- Employer Contribution: 3.0% of your qualifying earnings
- Employee Contribution: 4.0% of your qualifying earnings
- Government Tax Relief: 1.0% of your qualifying earnings
- Total Contribution: 8.0% of your qualifying earnings
This structure ensures that, from 6 April 2019 onwards, the combined pension contribution reaches 8% of the employee's qualifying earnings, with a significant portion being supplemented by employer contributions and government tax relief.
Previous Contribution Phases
- From 6 April 2018 to 5 April 2019:
- Employer pays 2.0% of qualifying earnings
- Employee pays 2.4% of qualifying earnings
- Government tax relief contributes 0.6% of qualifying earnings
- The total contribution amounts to 5.0% of qualifying earnings
- Up until 5 April 2018:
- Employer pays 1.0% of qualifying earnings
- Employee pays 0.8% of qualifying earnings
- Government tax relief contributes 0.2% of qualifying earnings
- The total contribution was 2.0% of qualifying earnings
This gradual increase in contribution rates is designed to ease both employers and employees into the practice of saving for retirement, while the government's tax relief incentivizes participation in the scheme.
