When an employee has been automatically enrolled in a workplace pension scheme, they can choose to opt-out if they decide that they don’t want to be a member of the scheme.
There is only a limited amount of time when an employee can opt-out of the pension scheme, which is known as the opt-out window.
When can my employees opt out?
Once staff have been auto-enrolled into your workplace pension scheme, they have one calendar month to opt-out from the scheme and get a full refund of any pension contributions that have been made. The opt-out window will start from which date is the later of:
- The date active membership began.
- The date they received a letter with the enrolment information.
How can my employees opt-out?
To opt-out of the pension scheme, your employees will need to complete and return an opt-out notice.
If you have an Aviva workplace pension scheme, your employees would be able to opt out online by completing an online opt-out form. If your employees aren’t able to opt-out online, they will need to call our dedicated opt-out line on 0800 056 3192. Our lines are open Monday to Friday 9.00am – 5.00pm. In either case, Aviva will check whether any opt-out notices received are valid, and make the refunds triggered by valid notices.
The opt-out notice is provided by the pension scheme. This is a safeguard to ensure that opting out is the decision of the employee rather than the employer. In Aviva’s case, this is given either in the online process or in the course of the telephone call. The written information we send to employees who need to be auto-enrolled gives an outline of opting out and directs them to the online or telephone processes. If as an employer, you actively encourage opting-out, this would be viewed as “inducement”.`
If you are not using Aviva’s Company Pension, when an employee submits an opt-out notice, you must check that it is valid.
A valid opt-out notice would include the following information:
- The employee’s full name.
- National Insurance number or date of birth.
- Signature of the employee (or a statement confirming the employee’s agreement to opt-out if they are submitting their opt-out notice electronically).
- The date the form was completed.
The opt-out also must contain the following statements that provide your employees with more information about opting-out and their employee rights:
- Your employer cannot ask or force you to opt out.
- If you are asked or forced to opt-out, you can inform The Pensions Regulator.
- You may be able to opt back in if you change your mind. In this instance, write to your employer.
- If you opt-out, your employer will normally reenrol you in three years’ time.
- If you change your job, your new employer will normally automatically enrol you into their workplace pension scheme.
- This notice only allows you to opt out of the pension scheme with the employer named on the opt-out notice. If you have other employment and wish to opt-out of their pension scheme, you will need to submit another opt-out notice.
It must also include the following statements and warnings, the last three of which need to be placed before the employees signature:
- If you want to opt out of pension savings, fill in this form and give it to your employer.
- I wish to opt out of pension saving.
- I understand that if I opt out I will lose the right to pension contributions from my employer.
- I understand that if I opt out I may have a lower income when I retire.
What do I do once the opt-out notice is received?
Once a valid opt-out notice has been received, you will need to immediately stop taking contributions from the employee’s salary and refund any deductions that have been taken.
If an employee opts-out on the first occasion that they are auto-enrolled, this effectively means that they have never been a member of the pension scheme.
After receipt of the opt-out notice, there will be no need to assess the employee’s earnings again until your re-enrolment date (the re-enrolment date is three years after your initial staging date).
Will I need to keep records of employees that have opted-out?
As an employer, you are required to keep either the original or a copy of the opt-out notice for four years, either electronically or in paper form.
Scheme administrators will also need to keep the following information
For four years
- The name of any employee that has opted out of the pension scheme.
- The date that the employer notified the pension scheme that the employee had opted out.
For six years
- The date of which active membership of the pension scheme was ceased by the employee.
What will my employees need to consider before opting-out?
Before your employees decide whether they want to opt-out, they may want to consider the following.
- Pension contributions that they make currently receive 20% tax relief from the Government and can provide a tax efficient way to save.
- By opting-out of the pension scheme, your employees will no longer be entitled to receive employer pension contributions.
Find out more about the importance of saving into a pension.
How would my employees opt back in to the pension scheme?
Employees, who meet the criteria to be automatically enrolled into your pension scheme, can opt back in at any time. To do this, they need to submit an opt-in notice. The opt-in notice is only valid if:
- It is in writing (this includes being sent in an email).
- It is signed by the worker who wrote it. If it is sent by email, it must include a statement from the employee confirming they submitted it.
Once the opt-in statement is received, you must identify the date on which it was received and enrol the employee within six weeks of that date. You must then pay contributions if they’re a jobholder at the time of submitting the opt-in notice. You are able to refuse the application if they opted out or stopped contributions within the previous twelve months.