Only workers earning more than £10,000 and aged between 22 and State Pension age will be automatically enrolled into a workplace pension by their employers. But if you earn less, you still have the right to join a workplace pension, and you may still be entitled to pension contributions from your employer.

Wondering what the pros and cons of automatic enrolment are? With few exceptions, being enrolled into a workplace pension is something you should welcome. Far too many of us aren’t saving enough for retirement and automatic enrolment is a hassle-free way of getting started, with your employer usually paying part of the cost.

What automatic enrolment means for you

Automatic enrolment involves two key changes that are likely to affect you.

First, it means that joining a workplace pension scheme becomes that much easier. Rather than having to take steps to join, under automatic enrolment most workers will be signed up as a matter of course (though you can opt out if you want to).

And second, it makes saving into a pension more financially attractive by making it compulsory for employers to pay into eligible workers’ pension schemes. A lot of employers were already doing this, but now all have to.

The reason these changes are being introduced is that too few of us are saving as much as we should for retirement. In general, there’s a big gap between the kind of lifestyle we hope to enjoy in retirement and the kind of lifestyle that we’re on track to be able to afford.

Don’t rely on the State Pension to cover you in retirement. From April 2016 the new State Pension will be £155.65 per week, which is far below the kind of income most people say they hope to retire on.

Are there any reasons to opt out?

For most people, it’s a good idea to stay in a workplace pension scheme after being automatically enrolled. But there are a few circumstances in which opting out may make better financial sense. In particular, you may want to consider opting out if you:

  • have problem debts and find yourself relying on borrowing to make ends meet each month, then getting on top of your debts should be your first priority
  • are close to retirement (within, say, two years) paying down any borrowing is likely to be a better use of your money
Information is based on our current understanding of taxation legislation and regulations; these may change in the future.
The value of your investments and income from them may go down and you may not get back the original amount you invested.