Opting out from auto-enrolment

Employers must auto-enrol all eligible staff, including those who may have indicated they will opt-out after this joining process. Employees can only opt-out from a pension scheme during a three-month period after an auto-enrolment joining process is complete.

Employees who opt-out during the formal three-month opt-out period will be restored to the position they would have been in if they had not become members. Employers may have to refund contributions made during this period before a refund is received from the scheme administrator, which could affect cash flow.

The CIPD reports that of those employees not in a workplace pension – i.e. working for smaller companies not yet auto-enrolling – 26% say they would opt-out. Coincidentally, the same proportion (26%) not eligible for auto-enrolment would like the opportunity to opt into a workplace pension.

All employees who have opted out will be automatically re-enrolled every three years, which means employees who wish to continue opting-out will have to opt-out again. These auto-enrolment and opting-out requirements underline the need for timely and effective communications with employees, not only in the run-up to auto-enrolment but in continuing three-year cycles thereafter.