Understanding postponement
Postponement is the process of delaying the automatic enrolment of your employees into your pension scheme. You can use postponement on some or all your employees. You must tell your employees if you're using postponement.
Key information
- On this page we’ll discuss the ways postponement can be used on workplace pension schemes.
- It’s a useful guide that can help you decide how you use postponement when setting up your scheme, if you’re trying to understand how your current scheme is set up or looking to update your scheme postponement rules.
- We’ll provide examples of the ways it can be used and give you information on where to get further support.
What is postponement?
Postponement can be used to delay the point at which an employee’s earnings are assessed. You can postpone your employees for up to a period of three months from the date they started working for you or after they become eligible to join the scheme because of their age or earnings. You can use this period to align your employee’s first contribution with their first pay. It can also help employees who normally earn less than the earnings threshold, manage occasional spikes in pay.
In some cases, it can be aligned with traditional probationary employment periods. However, postponed employees can choose to join the scheme by opting in during the postponement period. Depending on the age and earnings of the employee you may be required to make pension contributions for employees in their probationary period.
If you use postponement you need to tell your employees about this within six weeks of your auto-enrolment duties start date or their first day of employment with you, whichever is later.
You must tell your employees in writing that they're being postponed. This is called a postponement notice. If you don't write to your employees to tell them in the required timeframe, you'll need to calculate and make any backdated contributions to cover the period that employee should have been enrolled in your scheme. You'll need to tell your employees and agree with them who will cover the costs of the backdated contributions. You can read more about this on The Pensions Regulator's website (opens in a new window).
When can postponement be used
There are three points when you can use postponement:
- Your auto-enrolment duties start date.
- An employee's first day of employment (new entrants).
- When someone becomes eligible for your pension scheme because they're old enough or earn above the contribution threshold (monitoring).
You can use different postponement rules at each stage depending on how you onboard your employees and how your payroll works.
Example timelines
We’ve created examples to illustrate the effects on your duties timeline if you use postponement. Our examples are based on:
At your auto-enrolment duties start date
- Your duties start date of 8 January.
- You’re within five months of your duties start date.
- You have a monthly payroll running from the first to the end of the month.
- Paying your staff on the 28th of the month.
- Contributions deducted from pay are received by your pension provider no later than the 22nd of the next month, to comply with the pensions regulation.
For a new employee
- A new employee that started working with you 3 March.
Using monitoring
- An existing employee turns age 22 on 12 April.
Depending on who you set up your pension with, the scheme rules may mean you need to deduct the workers first contribution from their first full pay. We’ll use this rule in the examples below:
Using postponement
Postponement at auto-enrolment duties start date
When you hired your first employee on 8 January, you chose to use postponement for their workplace pension. Here’s what happens next:
1. You must tell the employees about postponement by 19 February (within six weeks of their start date). In this case, you told them on 15 January that postponement would last until 28 March.
2. In March, you’ll check how much the employee earned that month to see if they qualify for the pension scheme.
3. If they qualify (based on March earnings):
- Start taking pension contributions from their April pay
- Make these contributions either
- Shortly after their 28 April payday, or
- By 22 May at the latest
4. Finally submit your declaration of compliance to The Pensions Regulator by 8 June.
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Postponement for new employee
1. For new starters using postponement (example 3 March):
2. Tell them by 14 April (within 6 weeks) they’re postponed until 28 May
3. Assess May earnings on 28 May
4. If they qualify:
a. Take first contribution from June payroll (28 June)
b. Pay these by 22 July at the latest
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Postponement at monitoring stage
1. A new employee starts work on 8 January, aged 21 and is therefore not eligible for auto-enrolment
2. Their birthday is 12 April, when they turn 22
3. Assess April earnings on 20 April, to see if the employee qualifies for auto-enrolment
4. If the employee is being postponed, then you must communicate this to them by 24 May (within 6 weeks of the date their 22nd birthday)
5. Postponement can be up to 3 months, which here would be up until 12 July
6. The employee here is actually postponed until 28 June
7. Take first contribution from July payroll and pay this by 22 August at the latest.
Click to enlarge image (opens in a new window)
Some final points on postponement
Postponement doesn’t apply when:
- You’re late in complying with your duties, for example not notifying your new employee that you're using postponement within six weeks of the day they started working for you.
- You’re assessing workers as part of your re-enrolment.
Need more help?
If you’re setting a scheme for the first time and you’re considering if postponement is right for your scheme, you should speak to a financial adviser.
If you have any questions about your scheme with us, you should contact your Corporate Servicing Team. If you don't know who they are, you'll find their details by clicking the Contact us link at the top right of every screen on your dashboard.
More resources to help you manage your scheme