What is pension auto-enrolment?

Getting the most from your workplace pension

For the millions of people automatically enrolled into a workplace pension, the minimum amount you have to pay in went up in April 2019. But what your employer has to contribute increased too – effectively a hidden pay rise for many. Here's the lowdown on pension auto-enrolment.

Other top pension guides...

State Pension: Full lowdown including how to boost it.
Pension need-to-knows: The key points for retirement income.
Cheapest SIPPs: Take control of your own retirement saving.

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Auto-enrolment – the big questions

  • How does auto-enrolment work?

    Put simply, it's an opportunity to boost your retirement savings using a workplace pension scheme, with the benefit of your employer and the Government also putting in money.

    You won't be able to access this pension pot until you're 55 years old (57 from 2028). Until then, a pension company or scheme will hold it for you.

    Auto-enrolment is a departure from the way workplace pension schemes traditionally worked. Previously, the onus was on you to join your employer's pension scheme if you wanted to. Now, under auto-enrolment, employees are automatically put into their workplace pension scheme – though they can still choose to opt out.

    The aim of defaulting people into their workplace pension is to increase the proportion of employees saving for retirement.

    By November 2021, this example of 'nudge' economics meant that 10.6 million workers had been auto-enrolled and fewer than 10% of those eligible had opted out. However, there are still more than six million workers not in any workplace pension.

    The Government is considering ways to get more people into auto-enrolment, including lowering the qualifying age to 18, starting contributions from the first £1 earned and bringing the self-employed into auto-enrolment. Currently, enrolment is automatic for people aged 22 or over earning a minimum of £10,000 from a single job.

  • How much do I have to pay into the workplace pension?

    It depends on how much you earn, since you contribute a percentage of your pay – the more you earn, the more you pay in. The minimum percentage for contributions increased in April 2019.

    From 6 April 2019, the minimum your employer has to contribute increased to 3% of your salary (within certain limits detailed below), up from 2% previously.

    At the same time, the minimum total auto-enrolment contribution rose to 8% (that's the total you and your employer together must put in).

    So if your employer is only putting in the minimum 3%, your minimum contribution is 5%. But if your employer is putting in more than the minimum, you could pay in less than 5% (eg, if your employer puts in 4%, you only need to contribute 4%).

    Your contribution is from your pre-tax salary, so for most people the cost to their pocket works out less than it sounds.

    Importantly, too, contributions are based on a band of what are called 'qualifying earnings'. This is any pre-tax employment income between £6,240 and £50,270 (in 2024/25).

    So if you earn £25,000, you'll get at least £1,501 – (£25,000 – £6,240) x 8% – automatically pumped into your workplace pension.

    If you earn £50,270, the total will be £3,522 – (£50,270 – £6,240) x 8% – but if you earn say £55,000, the 8% is still based only on earnings between £6,240 and £50,270, so the total minimum contribution remains £3,522.

    Minimum contributions (as % of  'qualifying' or band earnings)

    6 Apr 2019 onwards 4% 1% 3% 8%
    6 Apr 2018 to 5 Apr 2019 2.4% 0.6% 2% 5%
    Before 6 Apr 2018 0.8% 0.2% 1% 2%

    Your employer may already have a more generous pension scheme, in which case these minimums are irrelevant.

    Also bear in mind that your employer can set higher contribution rates than the auto-enrolment minimum, so you could end up paying more. But your employer can't set the contribution rate so high that it acts as a deterrent for employees to contribute – if this happens, it may be investigated by the Pensions Regulator.

  • How does the Government's contribution work?

    Most people receive tax relief from the Government on their pension contributions.

    Tax relief is essentially a refund of the tax you originally paid on cash put into your pension, at your usual rate of income tax – 20%, 40% or 45%.

    Put another way, to get £100 put into a pension, a basic-rate taxpayer needs to pay in only £80. This is because the taxman then adds £20 to your pension pot. Higher-rate taxpayers need to save £60 to get £100, and top-rate taxpayers £55.

    With auto-enrolment, you contribute 4% of your qualifying earnings, the Government adds 1% tax relief and your employer tops this up with 3% – so in effect your net contribution is doubled. For example, with someone earning £31,240, their contributions will be based on their qualifying earnings (£31,240 minus £6,240) which is £25,000. That means their 4% is £1,000, the Government's 1% is £250 and their employer's 3% is £750 – so that's £2,000 automatically popped into their pension pot.

    As said above, auto-enrolment contributions are limited to your band of earnings between £6,240 and £50,270. But higher earners who normally pay 40% or 45% tax are entitled to these higher rates of tax relief on their contributions.

    Some firms will claim back tax relief for higher earners automatically, but many won't – which means you'll have to claim the extra 20% or 25% via a self-assessment tax return. If you don't normally fill in a tax return, call or write to HM Revenue & Customs (HMRC).

    How's it different from salary sacrifice?

    Your employer may allow you to contribute to your pension under what is called 'salary sacrifice' or 'salary exchange'.

    The attraction of salary sacrifice is that these pension contributions are made BEFORE your tax and national insurance (NI) are taken off. As contributions come out of your pre-tax salary and straight into your pension, you pay a reduced amount of income tax and NI. The Government gives you these savings – with the money that you would have paid in tax and NI going into your pension.

    So a basic-rate taxpayer would get the usual 20% income tax plus 12% for NI contributions back. A higher-rate taxpayer would get 40% tax plus 2% NI contributions, while an additional-rate taxpayer would get 45% tax plus 2% NI.

    Your employer may also put in some or all of its NI savings.

    WARNING: More than a million low-paid people are currently denied tax relief on their pension contributions because of the way their workplace pension scheme operates. Where the scheme is a 'group personal pension', even non-taxpayers (those earning less than the £12,570 personal allowance) receive a basic-rate tax top-up on their contributions.

    By contrast, most public sector and 'trust-based' occupational pension schemes only give tax relief to people earning over the £12,570 personal allowance. An estimated 1.2 million low earners – mostly women – in these 'net pay' schemes are denied millions in tax relief every year on their pension contributions.

    From 2024-25, anyone making pension contributions will be able to claim a tax relief top-up of an average of £53 a year. The first top-up payments will be made in the 2025-26 tax year. They'll be be made directly to those eligible and are taxable as income.

  • Who is entitled to a workplace pension?

    Auto-enrolment covers people between 22 years old and state pension age (currently 66, though increasing to 67 and eventually 68), who earn more than £10,000 (from one job) and work in the UK.

    There are exclusions, such as if you're self-employed or you're a sole director company with no other staff.

    If you earn less than £10,000 but more than £6,240, you can also ask to join your employer's auto-enrolment pension scheme. Your employer can't refuse and must also contribute.

    The Government is also considering plans to extend auto-enrolment to 18 to 21-year-olds to get younger people to start saving for their pensions. But if it happens no firm date has been set yet.

  • How can I check that I've been auto-enrolled?

    All employers have to offer a workplace pension to eligible workers. Most employers should have signed up to the scheme by April 2017. 

    Your employer must write to you when you’ve been auto-enrolled into their workplace pension scheme. They must tell you:

    • The date they added you to the pension scheme
    • The type of pension scheme and who runs it
    • How much they’ll contribute and how much you’ll have to pay in
    • How to leave the scheme, if you want to
    • How tax relief applies to you

    If you have already been enrolled, you'll also see deductions for your pension contributions on your payslip.

  • Do I have to enrol?

    No. But you'll be automatically opted in, which means you have to opt out if you don't want to take part.

    Also, unless you opt out within a month of joining you can't get a refund of any money you've paid into a pension scheme. You won't lose this money – you just won't be able to access it until you reach retirement age.

    Don't be afraid of opting out if, for example, you're having financial difficulties and need to maximise your take-home pay. You can opt out whenever you like – but as above, you won't be able to access the cash you've already contributed until you hit retirement age.

    Who won't be automatically enrolled?

    Your employer usually doesn't have to enrol you automatically if you don't meet the criteria above or if any of the following apply:

    • You've already given notice to your employer that you're leaving your job, or it's given you notice.
    • You have evidence of your 'lifetime allowance protection' (for example, a certificate from HMRC).
    • You've already taken a pension arranged through your employer.
    • You get a one-off payment from a workplace pension scheme that's closed (a 'winding-up lump sum'), and then leave and rejoin the same company within 12 months of getting the payment.
    • More than 12 months before your employer's auto-enrolment start date, you left ('opted out' of) a pension arranged through your employer.
    • You're from another European Union member state and are in an EU cross-border pension scheme.
    • You're in a limited liability partnership.
    • You're a director without an employment contract and employ at least one other person in your company.

    However, you can usually still join the pension scheme if you want to – your employer can't refuse.

    In addition to this, if you have more than one job, but earn less than £10,000 a year in each of them, you'll need to actively request to opt in, as although your total income is more than the auto-enrolment threshold, you're assessed by each employer separately.

  • Why might I want to opt out?

    Good question. Auto-enrolment is like a pay rise, so for most people it's worth having. However, that pay rise comes at a cost, as you will have less in your pay packet at the end of each month.

    But instead of focusing on that short-term pain of the loss of salary, think of auto-enrolment as a long-term gain for your retirement.

    That said, there are some circumstances where opting out (or reducing contributions if your firm allows it) does make sense, including...

    • If you've got very expensive debts, eg, payday loans or bank charges for busting your overdraft limit. Here it's likely worth clearing these before you start to contribute to your pension. Then opt back into auto-enrolment afterwards.

    • If you're near retirement and have low savings. There is a chance that having a bigger pension pot could reduce your benefits, but this is a rare scenario. You can use our 10-minute universal credit and benefit checker or speak to Citizens Advice to find out.

    • If you already have a pension plan, especially if it's a valuable one, there was a risk auto-enrolment might have put you over the lifetime allowance (LTA), which was £1,073,100 up until 5 April 2023. But this was scrapped from 6 April 2024, so there's now no overall maximum you can put in your pension during your working life. 

    • However, if you have other complex pension arrangements, it's worth speaking to an independent financial adviser. If you don't have one, speak to the Government's Pension Wise service, which offers guidance for over-50s on what to do with their pensions.
  • Do I have to opt out every year?

    If you opt out of your workplace pension, your employer must automatically re-enrol you every three years, as long as you're still eligible. Your employer will write to you to let you know you've been auto-enrolled again, and you'll have one calendar month to opt out again if you choose to.

  • Is it worth paying more than the minimum into the scheme?

    If you can afford to, then definitely consider it – especially if your employer will match your contribution, in which case it's essentially a pay rise.

    However, weigh this up against any payments you're making into a private pension to determine how much you want to pay in and can afford.

  • What happens if I'm already paying into my company's pension scheme – will I end up having to pay into two pensions?

    No. Auto-enrolment is designed to get everyone who isn't already paying into a workplace pension scheme to do so.

    What scheme you'll be signed up to is the decision of your employer, which means if you're already in a workplace pension scheme you could be in a different scheme from your colleagues who are being auto-enrolled (although usually it will be the same scheme).

  • What happens to my pension if I change jobs?

    Your workplace pension belongs to you and it'll still be yours when you reach pensionable age. However, although you'll be able to join a workplace pension scheme with a new employer, you won't necessarily be able to pay into your old pension scheme, or combine your old and new pension schemes. To find out, you'll have to contact your pension provider.

  • What happens if I have more than one job?

    If you have more than one job, you'll be auto-enrolled by all your employers if you meet the criteria.

    If you have more than one job, but earn less than £10,000 a year in each of them, you'll need to actively request to opt in, as although your total income is more than the auto-enrolment threshold, you're assessed by each employer separately.

  • I'm self-employed – why aren't I getting an auto-enrolment pension?

    Auto-enrolment applies to those who are employed, but if you're self-employed it doesn't necessarily mean you'll be excluded, eg, 'personal service workers' can be auto-enrolled. But who can be classified as such a worker is a subject of debate.

    Yet the self-employed can always start their own saving for retirement through a personal pension. They can also join NEST, the National Employment Savings Trust, a workplace pension scheme set up by the Government.

    If you're under 40, there's another option open to you – see the Lifetime ISA question below for more.

  • What happens if my employer goes bust?

    Any pension contributions you and your employer make will be held with the pension provider – not your employer. If your employer goes bust, your pension fund will be ring-fenced, so your retirement savings won't disappear.

    If your pension provider goes bust, you also have protection – see our Pension need-to-knows for more.

  • Does this stop me getting a Lifetime ISA?

    Not at all – you can get both. Auto-enrolment is the equivalent of a pay rise – not something you'd throw away lightly. But Lifetime ISAs – available to those aged between 18 and 39 – allow you to save for retirement (accessing the cash at 60) with the benefit of a 25% state bonus – a £1 top-up for every £4 you save.

    You can read more in our Lifetime ISAs guide.

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