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Home > Automatic Enrolment – Compulsory Pension Provision

25.0 Introduction

This section includes information taken from the Detailed Guidance on Workplace Pensions Reform issued by The Pensions Regulator.

Auto-enrolment involves:


the automatic enrolment in stages [see 25.1.7] of eligible jobholders – workers (see below) between age 22 and State Pension Age with qualifying earnings (see below) who are not already in a qualifying scheme


collecting contributions (employees’ and employer’s) and paying them to members’ personal accounts


a scheme administrator appointed to maintain each member’s account (collecting contributions, answering queries, handing out information, etc.)


investment and fund management being handled by appointed investment manager(s) and


when benefits become payable from a Defined Contribution scheme, pension being set up through the annuity market or through a drawdown arrangement.

Under the 'core' structure:


after April 2019 [see 25.1.7 (Note)], members must pay a minimum contribution of 5% of qualifying earnings [see 25.2.5] each year, and 3% of those earnings must be paid by the employer in addition


the government contributes 1% of members’ qualifying earnings, in the form of tax relief, which is counted as part of the members’ 5%


initially no transfers to or from personal accounts were allowed until normal minimum pension age or unless members suffer from incapacity [but see 25.2.10 – transfer out of small pension ‘pots’] and


prior to April 2017, there is an initial ceiling on annual contributions to personal accounts of £4,400 (in 2012/2013 terms) in total, reviewed on an annual basis.

The Government plans to remove the annual contribution limit and the transfer restrictions from 1 April 2017.

For those schemes with a definition of qualifying earnings that does not easily fit the standard statutory definition [see 25.2.5] alternative contribution rates, based upon different earnings definitions, may be used.

Defined Benefit schemes may also be used as qualifying schemes provided they satisfy certain benefit criteria. [For the alternative DC and DB tests see 25.3.2]

Employers with existing pension schemes have several options from their auto-enrolment date, including:


using their existing scheme for automatic enrolment where membership may start from the earliest of the (i) employer’s staging date [see 25.1.7] or (ii) member’s auto-enrolment date [see 25.1.1 (a) and (b)]


The Principal Employer may need to discuss with the trustees or provider amendments to scheme rules (and the process for making them) in order for the scheme to meet the criteria to be an automatic enrolment scheme. Also, the employer needs to be aware of how long it will take it to achieve active membership (including enrolling any jobholders who have opted in), as there is only six weeks after an eligible jobholder’s automatic enrolment date in which to complete the automatic enrolment process and achieve active membership.


using their existing scheme as a qualifying scheme [see 25.3.1] (providing it meets the qualifying criteria) or setting up an alternative scheme to fulfil their automatic enrolment duties or


Whilst this will mean the employer will not have an automatic enrolment duty for the eligible jobholders in the existing scheme, it will nevertheless be required to issue jobholders with information about auto-enrolment and, in respect of future new joiners, details about the scheme and how to opt out voluntarily [see 25.3.8 and 10].


setting up an alternative scheme for all other eligible jobholders.


For definition of ‘worker’, see 25.1.1(a) (Note).

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