How do I notify my Pension Provider an employee has opted out?

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How do I notify my Pension Provider an employee has opted out?

6th April 2017

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How do I notify my Pension Provider an employee has opted out?

It is the employee who must contact the pension provider to inform them they wish to opt-out and get an “opt-out notice“. This opt-out notice will then be passed to the company for action in payroll, either via the employee or directly from the provider. 

The following contains more detailed information from The Pensions Regulator:

Before a jobholder can choose to opt-out of pension scheme membership, they must:

• Have become an active member of the pension scheme under the automatic enrolment or opt-in provisions, and
• Have been given the enrolment information from their employer.

How a jobholder opts-out

If the jobholder meets the criteria above and wishes to opt out, they must do so by giving an ‘opt-out notice’ to the employer, which is usually provided by the pension scheme.

On receipt of the opt-out notice, the employer must take action to unravel the membership of the scheme so that the jobholder is treated as if they were never a member on that occasion. This includes giving refunds of any contributions that have been deducted.

An employer must keep records of any opt-outs because they will be required to re-enrol on the three-yearly re-enrolment date.

Source of opt-out notice

In the majority of cases, jobholders may only obtain an opt-out notice from the pension scheme into which they have been automatically enrolled, and not from the employer. This is a safeguard to ensure that the jobholder’s decision to opt out is taken freely and without influence from the employer.

The Pensions Regulator has provided detailed guidance on opting out, you can find this here: https://www.thepensionsregulator.gov.uk/docs/detailed-guidance-7.pdf