The qualifying requirements are as follows:
- The employee must work in the UK and be a UK resident
- They are not already in a suitable workplace scheme
- They are aged 22 or over, but under the UK State Pension age
- They earn more than £10,000 a year in the Tax Year 2022-23
Employees earning less than £10,000, who meet the other requirements and earn more than £6,240, can ask their employer to join and the employer cannot refuse.
If an employee wishes to opt out they may do so, but they do need to complete an opt-out form to confirm their decision. If they subsequently decide that they wish to join after all, the employer must allow them to do so.
How does the Pension Scheme work – is it Contributory?
The Workplace Pension is contributory on both sides – which means that both the employee and employer contribute. Contribution levels can vary, but there are minimum levels that each party has to make. In general, these are 5% contribution from the employee and 3% contribution from the employer. The Government also contributes in the form of tax relief.
The minimum contribution applies to earnings over what’s known as ‘Qualifying Earnings’, which is anything over £6,240, up to a limit of £50, 270. Some employers do, however, set up the scheme so that contributions are made on the total earnings.
Employees should be made aware on what basis their scheme has been set up and what their, and the Company’s, contribution will be.
Failure to comply with the employer obligations, as laid down in the legal duties of automatic enrolment legislation, could lead to investigation by the Pensions Regulator, followed by fines or other sanctions.