Paying less than the minimum contribution requirement.

These FAQs are for financial advisers only. They mustn’t be distributed to, or relied on by, customers. They are based on our understanding of legislation at the date of publication.

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Many employers and jobholders will recently have seen the minimum contribution they are required to make to their qualifying scheme increase as a result of the phased increase in contributions that took place on 6 April 2018. However, some of these jobholders may not want to pay a higher level of contribution.

If a jobholder doesn’t want to pay contributions at the increased level, they can ask their employer to allow them to continue in the scheme on a lower contribution amount. Any additional contributions that had already been paid will not be refunded. The scheme would no longer be qualifying in relation to the jobholder from the date that the lower contribution rate applied.

Employers are only required to pay the minimum contribution for members of a qualifying scheme, so where a jobholder chooses to cease active membership of a qualifying scheme by paying less than the minimum, the employer is not required to pay the minimum either – but they can if they want to.

If at the next cyclical re-enrolment date the scheme is still not a qualifying scheme in respect of the jobholder and the jobholder is classed as an eligible jobholder at the re-enrolment date, the employer may have re-enrolment duties:

  • If the eligible jobholder reduced their contribution below the minimum contribution required more than 12 months before the re-enrolment date, the employer must re-enrol them into a qualifying scheme (i.e. contributions must be increased to meet the minimum requirements).
  • If the eligible jobholder reduced their contribution below the minimum contribution required within the 12 months immediately before the re-enrolment date, the employer can automatically re-enrol them into a qualifying scheme if they want, but they don’t have to. Re-enrolling them would mean contributions would have to be increased to meet the minimum requirements.

Cyclical re-enrolment takes place roughly every three years after staging or the automatic enrolment duties start date, for new employers. At the cyclical re-enrolment date, the jobholder could decide to remain in the scheme and pay the additional contribution. Alternatively, they may decide that they don’t want to pay the increase, but want to stay in the scheme paying the same contribution as before. If they want to do this they should speak to their employer to arrange it, instead of opting out. If they opt out, all contributions will stop and active membership of the scheme will cease.

If the jobholder stays in the scheme but pays contributions that are less than the minimum required, they may have to be assessed and potentially re-enrolled again at the next cyclical re-enrolment date.

Note: There are exceptions that apply to some jobholders, meaning that the employer may not need to auto re-enrol them. You can find out more about this in the Pensions Regulator's detailed guidance on Automatic Re-enrolment

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