Auto enrolment is one of the biggest changes to pensions in recent years, but many people still find the term confusing. Let’s break it down into plain English.
Auto enrolment is a government initiative introduced in 2012 to help more people save for retirement. It requires employers to automatically enrol eligible employees into a workplace pension scheme and to make contributions alongside the employee.
Most employees are included if they:
Are aged between 22 and State Pension age.
Earn over a certain threshold from one job (currently £10,000 a year).
Work in the UK.
Even if you don’t meet these exact criteria, you can usually still ask to join your workplace pension scheme.
Both you and your employer pay into your pension. There’s also tax relief from the government added on top, which means more goes into your pot than you actually pay in. The money is then invested by your pension provider, with the aim of helping it grow over time.
You have the right to opt out of auto enrolment if you choose not to contribute. However, if you do, you’ll miss out on both your employer’s contributions and tax relief from the government. If you stay in, you’ll continue building a pension for the future.
Before auto enrolment, millions of people in the UK were not saving enough into pensions. This system was designed to make saving the default, so that people build up retirement savings without having to take lots of extra steps.
Auto enrolment is the reason many people have multiple small pensions from different jobs. Over time, it can be hard to keep track of them all. Pension App helps you trace and combine those pots in one place, giving you a clearer picture of your retirement savings.
With pensions, your capital is at risk.