If your contracts of employment make membership of your pension scheme compulsory, your employee won't be able to opt out of the pension scheme.
If you haven't made membership compulsory your employee can opt out of the pension scheme at any time. You are not allowed to encourage your workforce to opt out of the pension scheme or offer any incentives or rewards to those who do, for example additional pay or bonuses. You cannot dismiss anyone for being in the pension scheme.
How can someone opt out?
- If your employee tells you that they wish to opt out of the scheme you must request written confirmation of their choice, a verbal instruction is not sufficient.
- When a Voluntary Employee opts out of the pension, they will need to provide written instruction of this and confirm they no longer wish to be in the scheme. You will then need to retain this document for 7 years and regularly check whether they have become a Designated Employee and need to be automatically enrolled.
- When a Designated Employee opts out of the pension scheme, they will need to provide written instruction of this and confirm they no longer wish to be in the scheme. If they are opting out of the pension scheme after you have provided them with a Notice, they will need to record this decision on the Notice and return this to you. You will then need to retain this document for 7 years and enrol them back in after 3 years.
- If your Designated Employee returns a completed Notice choosing the scheme they want to be in but later wishes to opt out of the scheme, they must tell you by providing a physical written or digital record (email), and you will need to keep this notification for 7 years.
- As you will need to ensure that the information is submitted by the individual themselves and then retained you will need to decide what method of submitting this documentation works best for your organisation. Template documents are available for your workforce to use when opting out but not returning a Notice (see downloads section of this page). We suggest retaining this same information when processing requests to cease contributions by an employee so that you have a record of the decision they have taken in accordance with your data protection policies.
- Once someone has been enrolled in the scheme, if they opt out in the first 6 weeks both of you will have your contributions refunded. You will need to agree with your pension provider when the contributions will be paid across to them and what happens with the contributions that need to be refunded. Your pension provider will likely pay the contributions back to you and you will be responsible for ensuring that your employee receives their contributions.
Who do we need to tell when an employee has opted out?
- You will need to ensure that you update Revenue Service's Secondary Pension Return with this information as they need to know that someone has opted out of the scheme.
- Revenue Service do not need to be contacted directly or be given copies of the documentation you collect unless it is explicitly requested by them. You should make sure that the Returns Creator, or other software you use to complete your quarterly return, is updated with a revised automatic enrolment date. When you reach this date, you will not be able to submit your next return until the person is enrolled back into the scheme or the date is updated if they decide to opt out again after being enrolled.
What do we need to do if our employee asks to join the pension scheme?
- A Voluntary Employee who meets the eligibility criteria can ask to join your scheme and if they do, you must enrol them; in these instances, you will not have to pay any employer contributions for them, however, you can choose to do so.
- You will need to keep a check of the status of these Voluntary Employees. If they opt in before they become a Designated Employee you may have decided not to make any employer contributions. If a Voluntary Employee becomes a Designated Employee, you will need to start paying the employer contributions.
- If your employee opted out of your pension scheme and has now opted back into the scheme you must enrol them.
- If they opted out and have now requested to opt back in again, you must enrol them within a month of the date of request or 3 months from the date they previously opted out, whichever is later.
Our employee has opted out, can we still offer to pay our contributions into the pension scheme?
- If your employee has opted out of the pension you won't be obliged to make any employer contributions however you will need to check your contract of employment to make sure you aren't breaching employment law if you stop. If there are no contract requirements but you wanted to pay these contributions as part of a remuneration package you would be able to do this. You would need to discuss with your employee to confirm how this arrangement could work and seek their agreement for this. You will still need to re-enrol the employee within 3 months of the 3rd anniversary of their opt out.
It is important to recognise the long-term benefits for your employees from saving early for their retirement. You may wish to encourage all your workforce to join a pension scheme as early as possible. There can be valid reasons why someone has opted out and their personal circumstances could mean that not being in a pension scheme is the best option for them. As circumstances can change, your employee may find themselves in a position to be able to join a scheme.
