Contractual enrolment is an alternative to auto-enrolment.
All employers need to have a pension scheme that can be used for auto-enrolment – but they can choose to use this pension scheme for contractual enrolment instead if they’d like to.
Rather than having to work out which employees need to be put into an auto-enrolment pension scheme, employers can just put all their employees in.
Each employee must 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’.
- the pension scheme used must meet the criteria of an auto-enrolment pension scheme
- all employees who must be enrolled under auto-enrolment regulations, must instead be contractually enrolled into the pension scheme by their auto-enrolment date
- employees can’t opt out of the pension scheme
- if an employee stops being an active member of the contractual enrolment pension scheme, the employer still has a duty to review their status and their eligibility for auto-enrolment
- all employers must still register with The Pensions Regulator to confirm they’ve complied with the legislation.
So, it’s worth noting that contractual enrolment isn’t a way for employers to avoid the auto-enrolment legislation – there are complexities and if in doubt we recommend you take legal advice.