Workplace Pensions & Auto Enrolment in the UK

Workplace pensions auto enrolment is a government initiative that aims to help more people save for their retirement. It requires employers to automatically enrol their eligible workers into a pension scheme and contribute to their pension savings.

admin By admin - 14.08.2023

Who is eligible for auto enrolment?


According to the Pensions Act 2008, employers must automatically enrol workers into a pension scheme if they:


  • are aged between 22 and state pension age
  • earn at least £10,000 per year from one job
  • usually work in the UK


Workers who earn less than £10,000 but more than £6,240 can ask to join their employer's scheme and receive employer contributions. Workers who do not meet these criteria can still join a pension scheme, but their employer does not have to contribute.


What are the benefits of auto enrolment?


Auto enrolment has several benefits for workers and employers. For workers, it means:


  • they can save more for their retirement with the help of their employer and the government
  • they can choose to opt out of the scheme if they do not want to participate
  • they can keep their pension savings if they change jobs or take leave


For employers, it means:


  • they can attract and retain staff by offering a valuable benefit
  • they can comply with their legal duties and avoid penalties
  • they can choose a suitable pension scheme for their business and workers


How does auto enrolment work?


Employers have to follow certain steps to implement auto enrolment in their workplace. These include:


  • choosing a qualifying pension scheme that meets certain standards and criteria
  • assessing their workforce to identify who is eligible for auto enrolment
  • enrolling their eligible workers into the pension scheme and informing them in writing
  • paying contributions to the pension scheme on behalf of their workers
  • keeping records of their auto enrolment activities and reporting to The Pensions Regulator


Employers can also use postponement to delay the enrolment date of some or all of their workers by up to three months. This can help them align their payroll cycles or manage seasonal variations in staff numbers.


How much do employers and workers have to contribute?


The minimum contribution rates for auto enrolment are set by the government and increase over time. Currently, the total minimum contribution is 8% of the worker's qualifying earnings, of which at least 3% must come from the employer and 5% from the worker.


Qualifying earnings are the amount of money a worker earns before tax between £6,240 and £50,270 per year (in 2023/24). This includes salary, wages, overtime, bonuses, commissions, statutory sick pay, statutory maternity pay, statutory paternity pay and statutory adoption pay.


Employers can choose to increase the pensionable pay, by using the employees full Gross Pay, or selected pensionable pay components, but must ensure the contributions aren't less than the employees statutory minimum of Qualifying Earnings.


What are the different types of pension deductions?


Salary Sacrifice - This is where the employees pension contributions are deducted before Tax and NI are calculated, meaning a Tax and employees NI saving for the employee and an employers NI saving for the employer.  You do need to be careful with this pension type as you can not sacrifice salary below NMW (National Minimum Wage).

Relief at Source - This is where the employer contributes 3% of pensionable earnings.  The employee receives a 4% net deduction from the pay, with the remaining 1% of their contribution (Basic Rate 20%) collected by the pension provider directly from HMRC as Tax Relief

Net Pay - This is where the employees pension contribution is deducted before tax is calculated, thereby giving the employee Tax Relief through the payroll.  This also gives the employee full Tax Relief, no matter which band of tax they're on (Starter, Basic, Internediate, Higher or Top).


What is the 3 year re-assessment and re-declaration of compliance?


3 year re-assessment is a process that employers have to follow every three years to put certain staff who have left or reduced their contributions to their pension scheme back into it. This is also known as re-enrolment. Employers have to choose a re-enrolment date within a six-month window, assess their staff on that date, re-enrol the eligible ones, write to them, and complete a re-declaration of compliance to The Pensions Regulator. Re-enrolment aims to help more workers save for their retirement with the help of their employers and the government.


Where can employers and workers find more information?


Employers and workers can find more information about workplace pensions auto enrolment on the following websites:

The Pensions Regulator



We hope this gives you a bit of an insight into the world of pension Auto-Enrolment, if you need  further help, get in touch:



All the best

Hayley & Lauren

Chanonry Payroll Solutions Ltd

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