Workplace Pension in the UK: A Guide for Overseas Employers

One way for employees to save for retirement is with a ‘workplace pension’ that is arranged and contributed to by the employer, as well as the employee. This is set up in addition to any other private retirement plans or state pensions an employee may have and is often regulated by statute.

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The UK has a very specific set of regulations when it comes to workplace pensions, and if you are new to hiring in the UK it is worthwhile to know both the employer and employee’s obligations and contributions.  The important thing to know is that pensions must be offered in the UK as a mandatory benefit for most employees, which may be a change from some countries where offering pensions (such as a 401k in the US) is optional.

Companies that are new to the UK employment rules may need guidance to make sure they are complying with this essential benefit, and this overview will get you started.

Automatic Enrollment

In many cases, the enrollment of the employee in the workplace pension is automatic, meaning the employee does not have to make any choice or election, and cannot be encouraged by the employer to ‘opt out’.  Not every employee is automatically enrolled, but they will still have the opportunity to participate.

What criteria does the employee need to meet to be automatically enrolled?

There are a few conditions for automatic enrollment of the employee:

  • Classified as a worker
  • Age between 22 and ‘State Pension Age’ (age 66 in 2020)
  • Minimum earning of GBP10,000 annually
  • Employee ‘ordinarily’ works in the UK

When does the employer not have to automatically enroll the employee?

A number of exceptions exist to the automatic enrollment rules including:

  • Either employee or employer have given notice of termination of the position
  • Already part of a pension arranged by the employer that meets the criteria
  • Employee voluntarily opts out of the pension
  • Low income (less than GBP520 per month or GBP120 per week = no employer contribution)

Even if an employee falls within one of the automatic enrollment exceptions, they can nonetheless join the pension if they choose by notifying the employer.  Low income employees can still make their own contributions to a more

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Tim Burgess

Director, Shield GEO Services Ltd

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