A focus on what to do when an employee chooses to opt out of auto-enrolment

Auto-enrolment changed the way employees can save for retirement, and with the state pension age rising to 66 for both men and women, being part of a workplace pension scheme is perhaps more important than ever. However, there are some who will wish to opt out, and when this happens, employers have certain responsibilities. Here we look at what to do to support staff who choose to leave a scheme.

Brief guide to auto-enrolment

Auto-enrolment came into effect in 2012 and was the government’s response to records identifying that fewer than three million people were paying into a pension scheme, which was the lowest number since the records began.

In a nutshell, it means every employer in the UK must provide a workplace pension scheme and enrol staff who are between aged 22 and the state pension age, and earn £10,000 or more, as well as pay into it. Even if an employee would prefer not to be enrolled, the employer must register them; however, the employee does have the choice to then opt out.

employee chooses to opt out of auto-enrolment - piece of paper saying employee pension plan

Opting out of a pension scheme

On 1st July 2012, laws came into force prohibiting employers from encouraging staff to leave the company’s pension plan. Therefore, if an employee does decide to opt out, a notice will be provided by the pension scheme to avoid any employer involvement. The company must then immediately stop deducting contributions from payroll.

If an employee opts out within a month of being enrolled, they will be due any money paid in to be returned to them. If they choose to leave the pension scheme at a later date, it depends on the scheme’s rules as to whether the member of staff will receive the money, or whether it remains in their pension pot until the employee retires.

It is important to note that the employee can choose to opt in again at any time.

Reasons why employees may want to opt out

A workplace pension scheme is not the only way to save for retirement. An employee may have a private pension or an Independent Savings Account (ISA) already in place and prefer not to contribute to a further plan. Or for some on lower salaries, it may simply not be feasible to contribute part of their salary at that time, despite the benefits and the importance of saving for retirement.

As an employee’s circumstances could change, an employer should automatically enrol again at a later date any staff members who opted out, provided they remain an employee – this is usually done three years after contributions stopped. The employee can then choose to opt out again if they wish.

Advice if staff wish to opt out

Before an employee opts out of a scheme, the company should recommend their staff member seeks specialist and independent advice to ensure they are aware of all the benefits that come from being enrolled into a workplace pension scheme and are able to make an informed decision.

If you would like further information about AMR Bookkeeping Solutions or any of our client services, do give us a call on 01892 559480, or get in touch via our online enquiry form here

More articles you might like

Why choose AMR Bookkeeping Solutions?


We combine the highest level of professionalism with a friendly, clear approach for all of our clients.


Our approach is tailored to the needs of each individual client, and we build personal relationships to make sure that our clients can have complete trust in what we do.

AAT Qualified

All of our services are provided by our team of Association of Accounting Technicians (AAT) qualified bookkeepers, highly experienced bookkeeping experts and certified accountants.

CPD Trained

Each member of the team undergoes Continuing Professional Development (CPD) which keeps them right up to date with changing tax legislation.

Accredited Experts

All our bookkeepers are accredited in leading accountancy software Sage, Xero and QuickBooks.

AAT logo
Xero Gold Partner
Sage logo
Intuit Quickbooks ProAdvisor Gold
Freeagent logo

Get in touch for a free, no obligation consultation

Find out how AMR Bookkeeping Solutions can provide the right support for your business, send us your details and one of our experts will get in touch with you without delay.

Alternatively, you are welcome to contact us by phone on 01892 559480

You can also pop into our offices in Tonbridge.