Do you know the difference between contractual and auto enrolment pensions?

By Matthew Thompson | 21st January 2014 | 7 min read

The Pensions Regulator (TPR) has published a document offering guidance as it has been announced that many employers are finding it difficult distinguishing between contractual and auto enrolment pensions.

According to TPR, having an understanding of the difference between these two pensions is fundamental to understanding the workplace pension reforms which are currently being rolled out across the UK.

Both contractual and auto enrolment give employees the opportunity to join a workplace pension scheme, but the key difference between the two is consent. TPR defines the two types of enrolment as follows:

Contractual enrolment

Contractual enrolment requires the worker’s consent to join the pension scheme which is often obtained via the terms of the worker’s employment contract.

Auto enrolment

Auto enrolment does not require the worker’s consent to join the pension scheme and its terms are set out in the Pensions Act 2008 and associated regulations.

“At the moment, many employers refer to contractual enrolment as automatic enrolment” TPR commented. “However, the process that employers must follow for automatic enrolment is different to that which they will follow for contractual enrolment.”

You can download the full document explaining the differences between contractual and auto enrolment from the TPR website here.

Have you started preparing your organisation for auto enrolment yet? Gaining an understanding of the legislation is the first step you should be taking to prepare. IRIS is offering auto enrolment training seminars throughout the UK to ensure you are ready for your staging date. Find out more or book your place today.

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