Once an employee has been auto enrolled into a pension scheme, they have the option to opt out. We'll show you how to do this in Standard Payroll.
If your employee chooses to opt out:
- The employee MUST contact the pension provider within a set period–your pension provider will give you details on this process
- If the employee does opt out in the correct manner, then your pension provider will provide details of a valid opt-out
- If there is a valid opt-out, then any pension contributions deducted from the employee must be refunded on the next available payroll run
- As an employer, you'll also receive a refund of any employer contributions paid to the pension provider
- As an employer, you cannot influence the employee into opting out–it’s illegal to put pressure in any way on the employee
An employee has the option to stop their membership at any time which must be done through the pension provider.
Any pension contributions made by the employee, and you as an employer, remain as a 'pension pot' with the pension provider.
How to opt and employee out of a pension scheme
According to The Pensions Regulator, any time an employee opts out of an auto enrolment pension, they are entitled to a full refund of any contributions which they have made into the pension scheme within a month of receiving a valid notice.
To opt an employee out of a pension scheme:
- Go to Employee and click on the employee's record.
- Select Workplace Pension.
- Turn off the Enrolled in pension toggle.
- Choose Opt Out.
- Enter the effective opt-out date.
The employee will receive a full refund for any pension contributions they’re entitled to.
Note: In rare circumstances where an employee wants to opt-out of auto-enrolment but a refund isn't due, choose Cease Membership in step 4 and no refund will be calculated. Please contact your pension provider for more help.