What Is Auto-Enrolment?
Auto-enrolment requires employers to automatically enrol eligible employees into a workplace pension. Learn the rules and minimum contribution requirements.
Key Takeaways
- Employers must automatically enrol eligible employees into a qualifying workplace pension
- Eligible employees are aged 22 to 66 earning over £10,000 per year
- Minimum contributions are 8% of qualifying earnings — at least 3% must come from the employer
- Non-compliance results in daily fines from The Pensions Regulator
What auto-enrolment is
Auto-enrolment requires employers to automatically enrol eligible employees into a qualifying workplace pension scheme and make minimum employer contributions. Introduced in 2012 to address widespread under-saving for retirement. Employees are automatically enrolled and must actively opt out if they do not want to participate. Opt-out rates are typically 8-10%, meaning the vast majority of enrolled employees remain in the scheme.
Who must be enrolled
Eligible jobholders must be automatically enrolled: employees aged 22 to State Pension age (currently 66) who earn more than £10,000 per year from that single employer and work in the UK. Employees aged 16-21 or above State Pension age, or those earning between £6,240 and £10,000, have the right to opt in but are not automatically enrolled. Each employee must be assessed at their join date.
Minimum contribution rates
The minimum total contribution is 8% of qualifying earnings. At least 3% must come from the employer — the employee contributes the remaining 5%. Qualifying earnings are defined as the band between £6,240 and £50,270 per year. For an employee earning £25,000, qualifying earnings are £18,760 — so the minimum employer contribution is £563 per year. Employers can contribute more than the minimum if they choose.
Choosing a pension scheme
NEST (National Employment Savings Trust) is the government-backed scheme designed specifically for auto-enrolment — no eligibility restrictions, no minimum contribution levels, no charge to employers. Other providers including The People's Pension, Smart Pension, Aviva, and Legal & General offer qualifying schemes. Most payroll software integrates with major pension providers to automate contribution calculations.
Compliance obligations
Auto-enrolment compliance requires: assessing all employees at their start date, enrolling eligible employees within 6 weeks of their assessment date, communicating enrolment to employees in writing, paying contributions on time, re-enrolling opt-outs every 3 years, and maintaining records for 6 years. The Pensions Regulator (TPR) enforces compliance with escalating fixed penalty notices — £400 initially, rising to daily fines of £50 to £10,000 depending on employer size.