Are you asking: how do auto enrolment pensions work? We look at what  automatic pensions enrolment is and who will be automatically enrolled for workplace pensions.

What is automatic Pension enrolment?

Automatic pension enrolment is when an employee who meets the necessary requirements is placed into their employer's workplace pension scheme without having to request enrolment. Previously, employees were given the option to remain outside their workplace pensions, allowing them to deliberate before they ask to join.

Pension auto-enrolment has only been a necessity by the Pensions Regulator since 2012. Now, whenever a business employs a new worker, they must automatically enrol them in their pension scheme, so long as they employ eligible workers.

As a result of this legislation, many more employees are building up a pot of pension savings they can use when they finish working and start drawing down on their retirement savings. 

Choosing your workplace pension

Employees can also choose their own auto-enrolment pension or through a private pension company to create a personal pension scheme.

However, before you do so, it may be beneficial to seek professional advice from a financial adviser, given the complexities of choosing the right pension scheme.

However, regardless of whether you join an existing scheme or a different workplace pension, you are still responsible for adhering to your automatic enrolment duties as an employee under auto-enrolment rules.

Before choosing a suitable workplace pension scheme, you'll want to consider the following:

• Is the pension scheme you are considering compliant with auto-enrolment?
• How easy is the pension to establish and run?
• What processes need to be established to allow the scheme to run?
• What will your responsibilities be for keeping the pension scheme running efficiently?
• What are the particulars of the investment offering?
• Is the scheme you are considering easy to understand from an employee perspective?
• How does the scheme communicate with the employees enrolled into a workplace pension scheme?
• Are the scheme's charges fair and understandable?

Who will be automatically enrolled?

Whether you work full-time or part-time, your employer must enrol you in their workplace pension schemes if you meet the auto-enrolment requirements. These requirements and eligibility criteria include:

How much will I have to contribute to my pension pot?

Auto-enrolment contributions for your automatic enrolment pension scheme are divided into three parts. You pay pension contributions as an employee, while your employer and the government also contribute, the latter in the form of tax relief.

The minimum contributions are 5% for an employee and 3% for employer contributions. These percentages apply to all earnings above £6,240 to a limit of £50,270 for the pay period in the 2022/23 tax year, known as "qualifying earnings".

Therefore, if you earn £18,000 per year, your minimum pension contributions will be 5% of £11,760, worked out as the difference between the £6,240 and £18,000.

However, some employers may calculate pension contributions or percentages from the entirety of your statutory pay packet or wage, similar to how you pay taxes, such as Income Tax and National Insurance, rather than just your qualifying earnings.

Whether they do this or not depends on the configurations of your employer's pension scheme. You should speak with your employer if you need to know which level of earnings you will pay contributions from or check your employment contract.

They can tell you your minimum contribution either as a monthly quantity of money or as a percentage of your pay. 

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