Employees have the right to opt out once they’ve been enrolled. Provided they do this within a certain timeframe (known as their opt out period) they can be treated as if they had never been enrolled into the pension scheme.
When advising eligible employees that they’ve been auto enrolled or confirming to non-eligible employees that their request to join the workplace pension scheme has been processed, an employer must also provide them with information on their right to opt out of the scheme and the process by which to do so.
Auto enrolment opt out
Eligible and non-eligible employees who wish to opt out must do so by requesting a form from the pension provider. Employers must not supply this form directly. Employees have one month to return a valid form in order to be opted-out. In the event that the employee returns an invalid form, at your discretion, you can allow another 2 weeks for them to return a corrected one.
Auto enrolment opt out period
Employees who opt out within the given period are entitled to be refunded their contributions within a month of the notice being received or by the second pay date after the notice has been received, if payroll has already closed by that month. After this period employees can no longer opt out of the scheme under the rules, but they can request to cancel their membership of it and cease making contributions.
Under current rules, employees who have been members of an occupational pension scheme for less than two years may be entitled to a (partial) refund of contributions; however the government has indicated that it intends to put a stop to this practice. In most cases any previous contributions would remain invested on behalf of the former member (known as a deferred benefit).
Employers must not seek to influence their employees or encourage them to opt out of a workplace pension. Employers must therefore take great care that they avoid any action which may be interpreted as doing so. One example of this would be a flexible benefits package, which allows employees to opt out of or reduce contributions to a pension to offset other benefits. Employers must be able to show that this is set up in such a way that it is not an inducement to leave the scheme.