All employers need to have a pension scheme that can be used for automatic enrolment – but they can choose to use this pension scheme for ‘contractual enrolment’ instead if they’d like to.
How does contractual enrolment work?
Rather than having to work out which employees need to be put into an automatic enrolment pension scheme, employers can just put all of their employees in.
Each employee has to agree to join the pension scheme, and to have contributions deducted from their salary. This consent is given when they accept the terms set out in their employment contract – that’s why it’s known as ‘contractual enrolment’.
It’s worth noting that contractual enrolment isn’t a way for employers to avoid the automatic enrolment legislation – there are complexities and if in doubt we recommend you take legal advice.
To find out more on the differences between automatic and contractual enrolment, and how to use contractual enrolment correctly, please see our guide Understanding contractual enrolment.
For further information see The Pensions Regulator Detailed Guidance No. 6