Workplace pension: employee opt out

Workplace pension: employee opt out

Although the rules around auto enrolment mean that you need to add all eligible employees to your workplace pension, they can choose to opt out if they’d rather not be a member.

When your employees can opt out

There’s a limited amount of time in which an employee can opt out of your workplace pension. This is known as the opt out window.

Once a staff member has been auto-enrolled, they have one calendar month to opt out of the workplace pension and get a full refund of any pension contributions that have been made. The opt-out window opens either on the day you give your employees their enrolment information or the day we give them the terms and conditions of the pension, whichever is later.

How to opt out

To opt out of the workplace pension, your employees must give a valid opt out notice. The opt out notice is a safeguard to ensure that it’s an employee’s decision to opt out, rather than the employer’s.

If you have an Aviva workplace pension, your employees will receive information on how to opt out in the welcome pack we'll send them. There’s also the option of calling our pension helpdesk on 0800 056 3192. Our lines are open Monday to Friday 9am – 5pm.

If you’re not using Aviva’s Company Pension, your employee will need to obtain an opt-out form from your pension provider. When an employee submits an opt out notice you’ll need to check that it’s valid. Along with the date when the form was completed and the name of their employer, a valid opt out notice includes the employee’s:

  • Full name
  • National Insurance number or date of birth
  • Signature

The opt out notice must also contain the following statements, which give your employees more information about opting out and their rights as an employee:

  • ‘Your employer cannot ask you or force you to opt out.’
  • ‘If you are asked or forced to opt out, you can tell The Pensions Regulator.’
  • ‘If you change your mind, you may be able to opt back in – write to your employer if you want to do this.’
  • ‘If you stay opted out of the scheme, your employer will normally put you back into pension saving in around three years.’
  • ‘If you change your job, your new employer will normally put you back into pension saving straight away.’
  • ‘If you have another job, your other employer might also put you into pension saving, now or in the future. The notice only allows you to opt out of pension saving with the employer you name in the notice. A separate notice must be filled out and given to any other employer you work for, if you wish to opt out of that employer’s pension saving as well.’

The following declaration must be included before the employee’s signature:

  • ‘I wish to opt out of the pension scheme’
  • ‘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 to do once you’ve received an opt-out notice

Once a valid opt-out notice has been received, you should immediately stop taking contributions from the employee’s salary, and refund any deductions that have been taken. There’ll be no need to assess the employee’s earnings again until your re-enrolment date. If an employee opts out the first time they’re auto-enrolled, this effectively means they’ve never been a member of your workplace pension. If you use Aviva’s Company Pension, we will tell you when an employee opts out, so you can stop contributions. We will also pay you any refunds that are due.

Keeping records

As an employer, you’re required to keep either the original or a copy of the opt-out notice for four years, either electronically or on paper. If you use the Aviva Company Pension, we’ll keep the opt-out notice for you if we receive it. Scheme administrators also need to keep the following information.

For four years:

  • The names of any employees that have 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 on which active membership of the pension scheme was ceased by the employee

What your employees should consider before opting out

Before any of your employees decide whether they want to opt out, there are a couple of important points to consider.

  • Pension contributions that they make currently receive tax relief from the Government, and can provide a tax-efficient way to save. Tax benefits are subject to change and will depend on the employees' individual circumstances.
  • By opting out of the workplace pension, they’ll no longer be entitled to receive employer pension contributions

How your employees can opt back in to the workplace pension

Any employees who are not already members can ask to opt in to your pension scheme at any time. A valid opt-in notice must be in writing and signed by the employee, or if it's an email, include a statement from the employee confirming that they have submitted it personally.

You can reject an opt-in notice if the employee has stopped contributions into your scheme within the last 12 months. Following a valid opt-out notice, you must create membership within six weeks, and start employer contributions if you've assessed them as a jobholder. If they're an entitled worker, you must allow them to join the scheme, but you don't have to pay employer contributions.

Find out more about auto enrolment

Auto enrolment doesn’t have to be challenging. We’ve got all the information you need to get up and running with your workplace pension scheme.

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