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What is Auto-Enrolment?

The Government came up with an initiative called Auto-enrolment to encourage people save for retirement through a pension scheme at work in the UK.

In the past, employers didn’t offer many workers a pension scheme or workers themselves didn’t join any pension scheme. Regardless of both, it was the workers who didn’t get to enjoy the valuable pension benefits. However, this has changed and under a law introduced in 2012 requires all the employers to offer a workplace scheme and automatically enrol eligible workers into this scheme.

This requirement is already phased in from 2012 starting with the largest UK employers which are then followed by medium-sized and small employers. And, by 2018, all the employers will have to automatically enrol all their eligible employees in workplace pension scheme.

If you work full time or part time under someone and have not enrolled in a scheme, then your employer should enrol if you meet certain criteria. Criteria include you must be at least 22 years old, but under the State Pension age and earn more than £10,000 a year. And, you must also be working normally in the UK under a contract of employment.

After you have been enrolled, you can also opt out of such scheme. In case if you do so, you not only miss out your pension contributions but also the tax relief from the government. And, if you choose to rejoin your employer’s workplace pension scheme at a later date, he/she must re-enrol you back into the scheme. This should be done approximately every three years, but at the same time you must be eligible.

Although this total minimum contribution is currently set at 2% of your earnings (0.8% from you, 1% from your employer, and 0.2% as tax relief, it is said to be increased up to 5% of your earnings in 2017 and 8% of your earnings in 2018.

To sum these things up, staying in a workplace pension is actually a very good idea as such scheme helps you to save for your retirement.  However, if you have debt problems, then it is better to focus on clearing them than to stay in workplace pension.