No matter how much we love our careers, we’ve all dreamed about the day our retirement rolls around. While it might feel like a lifetime away, it’s closer than you think. It’s best to understand what pensions you’ll be entitled to in advance and what you must do to get it.
Inversely, as an employer, it’s vital to ensure you are compliant with payroll legislation. This includes pension schemes that can give your employees confidence as they near retirement.
With that in mind, we want to shed some light on the automatic enrolment pension (also known as auto enrolment pension) process—a scheme which pretty much does what it says on the tin.
What is auto enrolment?
An automatic enrolment pension is a mandatory system that has been in place since 2018 requiring employers to enrol qualifying employees into a workplace pension scheme. Alongside a periodic deduction from employee’s take-home pay, employers must also contribute to the scheme.
Why is auto enrolment a legal requirement?
Automatic enrolment evolved to protect employees by making sure they get the best financial pre-planning possible to help them prepare for retirement.
The Pensions Act 2008 made it a legal requirement for organisations to:
- offer a workplace pension,
- (And, just as importantly,) pay into that pension at a required rate.
Now that people know what they’ll be paid, they can plan, budget, and build up their pension, making sure they enter retirement confident that they’ve supplemented their state pension.
Who qualifies for auto enrolment pensions?
While it’s an automatic process, not everyone qualifies for an auto enrolment pension.
You’ve got to be:
- Aged between 22 and State Pension age,
- Earning at least £10,000 per year,
- Not already enrolled in a qualifying workplace scheme,
- Working in the UK—under a contract of employment OR under a contract to provide work or services as part of someone else’s organisation.
What if you’re not eligible?
If you don’t meet the criteria for auto enrolment—if you earn between £6,240 and £10,000 a year—your employer doesn’t have to automatically enrol you into the scheme. Even if you aren’t eligible, you can still ask to join. Your employer must enrol you and make contributions on your behalf.
It’s enrolment, just without the auto part.
How might auto enrolment change?
The government have discussed changes to auto enrolment. While not yet in effect, these reforms could reshape eligibility and savings potential so it’s important to keep it on your radar.
These changes would be:
- Lowering the auto enrolment age from 22 to 18,
- Remove the lower limit of the ‘qualifying earnings band,’ so that contributions are paid from the first pound earned.
What are the auto enrolment minimum contributions?
Under this scheme, there’s a minimum contribution amount set by the government every year. This is the lowest amount that must be paid into an employee’s pension fund—this figure is made up of a contribution from you, your employer, and a government contribution (through tax relief).
For 2025/26, the minimum requirement for auto enrolment pensions is 8% calculated from your ‘qualifying earnings’ before tax or National Insurance contributions are deducted.
This translates to:
- 5% from employees (including the government’s tax relief)
- 3% from employers
These are minimum contributions are taken from your ‘qualifying earnings’ before tax or National Insurance contributions are deducted.
Contributions are only calculated on earnings between £6,240 and £50,270. So even if your salary is £40,000, you don’t contribute from the full amount—only the portion above £6,240.
Your ‘qualified earnings’ include:
- salary
- wages
- bonuses
- overtime
- commission
While the minimum contribution is only 8%, employers are only legally obliged to pay 3%. They can, however, choose to pay more than this—leaving the employee to pay the remaining percentage to make up the 8%. Say, for example, your employer contributes 4%, you would then only pay 4%.
It’s worth noting that employees can choose to contribute more, too. But only if they wish.
These contribution rules apply to pension schemes that qualify for auto enrolment under UK law. Some non-auto enrolment workplace pensions may operate under different terms.
Can employees opt out of auto enrolment?
While automatic enrolment is compulsory, staying enrolled isn’t. You can opt-out if you want. This is great news for those who might have found a better pension scheme somewhere else or just prefer to invest money differently.
But remember, if you qualify for it, it’s an automatic process—so you’ll have to proactively opt-out.
Whether you opt in or out is up to you. It won’t affect your rights within the organisation or your job in any way. Simply complete an opt-out form from your pension provider or via an online account.
If you opt out within the first month of being enrolled, known as the opt-out period, any contributions will be refunded. However, in most cases, if you leave the pension scheme more than one month into active membership, you might find that the first contributions have already been taken and will stay in your pension fund.
But don’t worry, the money will still be yours; you just won’t have access until you retire. So, it’s best to make the decision quickly!
Can you opt back in?
While automatic enrolment might not suit you right now, that doesn’t mean that will always be the case. Luckily, you can choose to re-enrol at a time that suits you; but in most contracts, you can’t do some more than once every 12 months.
For employers, opting in (and out) revolves around a staging date—the date they started their auto-enrolment scheme.
If you opt out within a year of that staging date, you won’t be opted back in and will be reassessed at the next re-enrolment date. You always have the right to opt out again or re-enrol if you choose.
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How do employers manage automatic enrolment?
This is where we get to the nitty gritty of managing the process to ensure everything runs smoothly—and abides by government laws. While the ins and outs of handling all the data and calculations may seem complex, we’ve outlined everything you need to know as an employer.
Automatic enrolment is a great benefit for your workforce, but like all aspects of payroll and contributions, it requires careful handling.
We’ve said it before, and we’ll say it again: getting it right means staying compliant and making sure your people receive the correct pay and pension.
Here are 8 steps to managing your automatic enrolment with efficiency and compliance:
- Know your staging date: First things first. This is the date when your automatic enrolment duties start. Since 2018, every organisation needs to have automatic enrolment in place when they first open, no matter their size.
- Choose a pension scheme: It’s important to choose a pension provider that offers a scheme that allows for automatic enrolment. Depending on the size of your business, it’s important to consider factors like accessibility, compatibility, and cost.
- Communicate with your employees: Let them know about the automatic enrolment process and how it’ll affect them. You’ll need to make your teams aware of the pension scheme you’ve chosen, how much they’ll be contributing, their right to opt out, and their right to re-join later.
- Assess your workforce: Know which of your employees are eligible, and which aren’t.
- Enrol your employees: After all the assessing, checking eligibility, providing information, finally you’re ready to sign people up.
- Keep on top of the data: Keep accurate, up to date records of your automatic enrolment process. This includes details of employees who have opted out, or opted in, and records of all enrolment communications with employees.
- Keep monitoring eligibility: Keep checking enrolments, and calculating all the contributions. For employees who opted out, re-assess them every three years.
- Automate the process: Using a provider or software that supports automatic enrolment, like Cintra, can streamline the process. Automating assessments, contributions, and compliance tracking helps reduce errors and makes sure you stay on top of your legal responsibilities.
The benefits of an auto enrolment pension
There’s plenty to like about an auto enrolment pension. For both employees and employers.
The whole reason behind the policy is to help support working individuals in investing in their future, plain and simple. And who doesn’t want that?
For employers, it’s a way of making sure that people are looked after. And if you’re an HR or payroll person, that’s probably a big reason you do your job. Your pension scheme can be an attractive benefit and a good selling point for your team.
Here’s a breakdown of the benefits:
| For Employees | For Employer | For the Government |
|---|---|---|
| Improve financial security for retirement. | Legal compliance with pension legislation. | Reduces long-term reliance on state pension. |
| Additional contributions from employers and tax relief. | Salary sacrifice schemes lower National Insurance costs. | Encourages long-term saving culture. |
| Automatic and hassle-free. | Boost employee satisfaction and productivity. | Improve long-term economic stability. |
| Potential investment growth over time. | Attract and retain talent with meaningful benefits. | Increases private investment in UK economy. |
Auto enrolment isn’t just about ticking boxes—it’s a powerful way to build a secure financial future and a more resilient workforce. Whether you’re an employee making your first contributions or an employer managing compliance, the long-term benefits are undeniable.
Make automatic enrolment work for you
Automatic enrolment is a win-win, but it can be time-consuming—especially if you have many employees.
That’s where payroll software like Cintra comes in. Cintra simplifies the auto enrolment process and does most of the heavy lifting for you. We make sure you put compliance first in every step of the process with automated checks and auto enrolment letters all in one place.
Want to learn more? Book a demo and see how it can make your life easier.
Payroll Legislation Guide
The facts, figures, thresholds and allowances for 2025/26 spanning tax, National Insurance, pensions, statutory payments and more.
