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Opting employees out of a pension scheme

Opting an employee out of a pension scheme means that an employee chooses not to be part of a workplace pension scheme after they’ve been automatically enrolled. The Pension Regulator states it’s your duty to make sure that your employees opt out notices are processed correctly. 

Key information

  • Employees have a one month opt-out window after being enrolled to decide if they want to stay in the pension scheme and receive a refund of their contributions. It’s your duty to make sure these are processed.
  • We’ve provided step-by-step guidance on when your employees can opt out and what you need to do to process opt-outs.
  • We’ve provided further information about the most common opting out issues.

When can employees opt out?

Employees can opt out of the pension scheme during their opt-out window, which starts when they're automatically enrolled. This window typically lasts one month. Their eligibility for the scheme determines when they can opt out.

If your employee has been assessed as an eligible jobholder or a non-eligible jobholder, they'll be able to opt out during their opt-out window. However, if they have been identified as an entitled worker, they won't be able to 'opt out' or cancel their plan until they receive their welcome documents after the first contribution is received.

 

Can my employees leave the pension scheme after their opt-out window?

Yes, they can leave the scheme anytime after their opt-out window has closed. However, any contributions that have been made into the plan will stay invested. If they leave the scheme, you won't need to make employer contributions for this employee.

Employer responsibilities

When you receive an opt-out request, you must:

  • Make sure the opt-out notice is valid, in the right format, and submitted within the employee's opt-out window.
  • Process the request using your auto enrolment dashboard.
  • Refund any contributions that you've already taken from the employee's salary.
  • Update your payroll to stop future contributions.
  • Keep a record of any opt-out notices you've received for six years.

Contractual enrolment

Contractual enrolment places employees into a pension scheme through their employment contract. The contract must explain their right to cancel.

If an employee wants to cancel their plan, they must notify us in writing within 30 days of receiving their welcome documents. We’ll refund their contributions to you, and you must pass the refund to them.

You should tell your employees that cancelling may lead to them being automatically enrolled later if they meet age and earnings criteria. If so, they’ll receive a new opt-out notice.

How to opt out employees using the auto enrolment dashboard 

Here’s the steps you need to follow if you've received a request from an employee to opt out using our auto enrolment dashboard: 

  • Make sure the opt-out notice is received within the employee’s opt-out window.
  • Employees can use our opt-out form or submit a written notice, as long as it meets The Pensions Regulator's requirements (opens in a new window). 
  • Ensure the notice is fully completed, signed, and dated by the employee.

You can find out more about opting employees out in our video managing your workforce. 

  • Go to Workforce tab and select the employee by clicking on their name.
  • Click "opt worker out".
  • Input the date you received the request within the employees' opt-out period.
  • Tick the box to confirm you've received and agree with the statements on the opt-out notice.
  • Confirm that the completed opt-out notice meets The Pensions Regulator’s requirements.
  • Click "opt out" to finalise the process. You should let the employee know once this is done.  

  • If they opted out during their opt out window, you’ll need make sure that any contributions deducted from employee is refunded back to them.
  • We’ll help by returning any contributions you’ve already made for the employee back to you. You’ll then need to pass their contribution back to them.

  • We’ll create a task in your auto enrolment dashboard to remind you to update your payroll system. Once you’ve done this, mark the task as complete.
  • Make sure your HR or payroll system no longer deducts contributions for this employee.
  • If you’re unsure how to make the change, contact your payroll software provider for guidance.

Important information about refunding contributions

If employees opt out of the pension scheme within their opt out window, they are entitled to receive a refund of the contributions they have paid. This means:

  • If you've already deducted an employees’ contribution from their pay but you’ve not submitted your payment schedule, you should refund the contribution directly to your employee. We won't accept contributions for employees who have opted out.
  • If you haven’t yet deducted contributions, update your payroll to prevent the deduction.

We’ll refund any contributions already submitted to us back to you, and you must pass them on to the employee. We can’t refund employees directly.

Remember, we can’t refund pension contributions if a valid opt out notice isn’t received within the employees opt out window.

When employees can opt out themselves

Employees who receive a joining notice from us can opt out using our automated phone line or online service. To do this, they must enter the personalised access code provided in their notice.

We’ll update your auto enrolment dashboard with the names of any employees who opt out this way.

 

Further support for you and your employees

Here’s some common issues that we see when opting employees out: 

Go to the Workforce tab, click the employee’s name, then select ‘View document history’ to download a copy of their communications with the access code.

Check that their date of birth is correct in your records. If it’s wrong, update their details.

Confirm their date of birth and access code are correct. If they’re trying to opt out after the window has closed, they can leave the scheme, but contributions won’t be refunded.

If the opt-out option isn’t visible on the employee homepage, the opt-out window has closed.

If the option isn’t available, the opt-out window may have closed, or the employee may have tried to opt out before the window opened.

Yes. If an employee opts out within their one-month opt-out window (which starts when they are automatically enrolled), they are entitled to a refund of any contributions they have paid. You must process the opt-out notice correctly and refund any contributions deducted from their salary.

Royal London will return any contributions already submitted to them back to you, and you must pass these on to the employee. Refunds cannot be made if the opt-out notice is not received within the opt-out window.

No. Once an employee has opted out, you do not need to make any further employer contributions for that employee. If they leave the scheme after the opt-out window has closed, any contributions already made will remain invested, but future contributions should stop.

Yes. Employees who have opted out can choose to opt back in at any time. You must support this process as part of your legal duties. They can do this by sending a signed letter or email confirming their request, and you’ll need to process it through your auto enrolment dashboard.

Additionally, every three years, employers have a duty to automatically re-enrol certain employees who previously opted out, if they meet eligibility criteria.

More resources to help you manage your scheme members

 

Additional support