Can an employee reduce their pension contributions?

Pension savings can be a very effective way to save for the future. Your employee may not be aware of how much money they’re missing out on if they stop paying into their pension pot. They should visit our website before they make a decision, to understand what they risk losing by stopping or reducing their contributions.

What if your employee wants to stay in the pension scheme, but doesn’t want to pay the balance to meet the legal minimum contribution?

An employee can decide that they’d like to reduce their pension contributions so as they’re not meeting the legal minimum contributions. This means the employee will no longer be classed as ‘eligible’ for auto-enrolment’.

It should be their choice to pay below the minimum levels, and their employer is legally not allowed to suggest, encourage or induce them to do so.

Employers can choose to support the employee’s decision to reduce their pension contributions by following our guide,’Paying below the minimum contribution levels’.

Reducing their pension contributions means:

  • the employee should remain in the pension scheme as an active member.
  • you don’t have to continue paying pension contributions for them – but you can if you want to and can choose how much you’ll pay.
  • you may need to re-enrol your employee into the pension scheme every 3 years (sometimes sooner). They’ll then have the opportunity again to see if they’d like to contribute to meet the total legal minimum contributions.
  • the employee can decide to join the pension scheme and pay towards the total minimum contributions at any point in the future. They’ll just need to let their employer know in writing. This can be a signed letter or email, if it includes a statement to say it has come from them.

If you choose not to enable your employees to pay below the legal minimum contributions, they can opt out and pay pension contributions directly into their pension pot by Direct Debit. They’ll still benefit from the tax relief on their payments, and you won’t need to contribute. Your employee should be directed to our website if they’d like to set this up.

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