Pensions auto-enrolment

The rules

An eligible employee must be automatically enrolled into aqualifying pension scheme from the date of auto-enrolment. An eligible employee is:

  • Between 22 and the state pension age, and
  • Someone who earns above the income tax personal allowance (£7,475 in 2011/12).

The employee can opt-out of the scheme whenever they choose but the employer must put them back on the scheme every three years, at which point the employee is eligible to opt-out again.

The dates that associations will need to begin auto-enrolment of their workforce vary depending on the size of the association based on employee numbers.

  • The largest associations will have to commence auto-enrolment by the summer of 2013
  • The smallest by 2016.

Employees must be automatically enrolled onto a qualifying pension scheme. A qualifying scheme can be either:

i) a defined benefit scheme, or

ii) a defined contribution scheme.

An association will have to make a number of key decisions around recruitment, reward and cost before deciding which scheme to use (see below for further analysis of these decisions).

Funding auto-enrolment

The employer and the employee will be required to make contributions if the chosen pension scheme is a defined contribution scheme. These contributions will initially be a minimum of 1% from the employer and 1% from the employee. These rates will rise over time to a minimum contribution of 3% from the employer and 4% from the employee from October 2017.

If the association decides to enrol employees onto a defined benefit scheme the costs for each employee will be similar to the funding currently required for existing employees.

Read the auto-enrolment guide for employers for more details.

Implications of auto-enrolment


The provision of pensions is a laudable aim for any responsible employer. Auto-enrolment will mean that many workers, especially the lower paid, will be pensioned for the first time. This will lead to increased costs for employees and employers.

Increased costs

It is estimated at present that around 30 to 40% of all employees in the sector are currently enrolled on a pension scheme. This figure is expected to double to around 80% with auto-enrolment. The effect of this will increase cash contributions having to be made by associations to the related pension scheme.

Auto-enrolment will be a bigger issue for housing associations with care and support as they are labour intensive with lower paid staff (cleaners, caretakers etc).

Increased pension fund administration

The administration of enrolling employees onto relevant schemes will be burdensome. Other administration will include:

  • Details about the number of employees on a scheme
  • The ongoing monitoring and enrolment to/resignation from the scheme
  • Educating the affected staff.

Staff recruitment and retention

Housing associations will have to make important decisions about their overall remuneration strategies. Auto-enrolment may mean the trend to close defined benefit schemes to new employees is accelerated as the costs of having a majority of employees enrolled on a defined benefit scheme may be too onerous.

What housing associations need to do now:

  • Staff will need to be made aware of the financial implications, and the likely effect on their take home pay
  • Establish what kind of scheme they are going to enrol their employees on
  • Consider the impact of auto-enrolment in their budgets and business plan
  • Establish the date of their enrolment.

Auto-enrolment is compulsory, housing associations have no choice.