Jargon buster



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A

Automatic enrolment (also auto enrolment): This is one of the new employer duties. It involves enrolling a worker into a pension scheme without the need for any action by the individual. This is explained in part 5 of our guide: Automatic enrolment.

Automatic enrolment criteria:

These apply to a pension scheme. The first criterion is that the scheme must be a qualifying workplace pension scheme. In addition, the scheme must not contain any provisions that:
 

  • prevent the employer from processing the automatic enrolment, opt in or re-enrolment of an individual worker; or

  • require the individual to express a choice, or provide any information, in order to remain an active member of the scheme.


More information can be found in part 4 of our guide: Pension schemes.
 
Automatic enrolment date: This date applies to an individual worker and is the first day on which they meet the criteria to be an eligible jobholder. The only exception is where an employer has chosen to postpone the introduction of automatic enrolment, in which case it will be at a later date at the end of the postponement period.
 
Automatic enrolment pension scheme: A pension scheme that meets three tiers of requirements - the automatic enrolment criteria, the qualifying criteria and the minimum requirements.
 
Automatic enrolment scheme: A scheme that meets the automatic enrolment criteria.

Automatic re-enrolment: This applies where an individual has opted out of a scheme that they have been automatically enrolled into. In this situation, an employer is required to go through the process of automatically enrolling that individual back into a scheme every three years. There are a couple of other scenarios where re-enrolment applies and these are described in part 5 of our guide: Automatic enrolment.

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C

Contractual enrolment: This is where an employer uses a contractual agreement, such as the contract of employment, as the method for enabling individual employees to join a pension scheme that they provide.

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E
 
Eligible jobholders: These are individuals who are eligible for automatic enrolment. They are workers who:
 

  • are aged between 22 and state pension age;

  • are working or ordinarily work in the UK under their contract; and

  • have qualifying earnings that are above the earnings trigger for auto enrolment (currently £8,105).
     
Employer duties: This is the over-arching name given to all the new requirements an employer must meet in relation to pension provision for their workforce. They were established under the Pensions Act 2008 and will start to be introduced with effect from July 2012. Automatic enrolment is the most widely talked about duty but there are others – as outlined in part 1 of our guide: Employer duties and defining the workforce.
 
Enrolment date: This is another term for the automatic enrolment date.
 
Enrolment information: Part of the ‘mandatory information’, this is the information that an employer must provide to an eligible jobholder to help them make an informed decision. It must be provided within certain timescales, and is described in detail in part 5 of our guide: Automatic enrolment.
 
Entitled workers: These are individuals are not eligible for automatic enrolment but are entitled to join a pension scheme. They are workers who:
 
  • are aged between 16 and 74;

  • are working or ordinarily work in the UK under their contract; and

  • earn less than £5,564 (in today’s terms).

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J

Joining: This term is used in a specific way under the new legislation. It refers to entitled workers, who will have the right to join a pension scheme under the new duties (unless they are already an active member of a scheme with their employer).

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M
 
Mandatory information: Employers are required to provide, as a minimum, certain specific information to the different categories of worker. This is one of the new employer duties and is covered in parts 5 and 6 of our guide (Automatic enrolment and Opting in, joining and contractual enrolment).

Minimum requirements: These differ according to the type of pension scheme:

  • For a defined contribution (DC) scheme, the minimum requirements are principally based on the level of employer and total contributions.

  • For a defined benefit (DB) scheme, the minimum requirements set a benchmark for the level of benefits a member is entitled to.

  • Hybrid schemes, which contain an element of both DB and DC, will have to meet the same (or similar) minimum requirements to DB or DC schemes or a combination of both.

More information can be found in part 4 of our guide: Pension schemes.

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N

NEST: The National Employment Savings Trust, a new workplace pension scheme that is open to all employers to use for their UK-based workers.
 
Non-eligible jobholders: These are individuals who are not eligible for automatic enrolment but can choose to opt in to a pension scheme. They are workers who either:
 
  1. - are aged between 16 and 74;
    - are working or ordinarily work in the UK under their contract; and
    - earn between £5,564 and £8,105 (in today’s terms)

    2. OR

  2. - are aged between 16 and 21, or state pension age and 74;
    - are working or ordinarily work in the UK under their contract; and
    - have earnings over £8,105 (in today’s terms).

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O

Opt-in notice: This is the formal notice an individual must give their employer when they wish to opt in to an automatic enrolment pension scheme. Certain information must be included on an opt-in notice to make it valid. 
 
Opting in: This term is used in a specific way under the new legislation. It refers to workers who will have the right to opt in to an automatic enrolment scheme. Principally these are either a non-eligible jobholder or an eligible jobholder who has been automatically enrolled but subsequently opted out, although there are other slightly more complex situations in which opting in could also apply.
 
Opt-out notice: This is the formal notice an individual must give their employer when they wish to opt out of an automatic enrolment pension scheme. Certain information must be included on an opt-out notice to make it valid.

Opt-out period: This is a prescribed timescale within which eligible jobholders who have been automatically enrolled, or non-eligible jobholders who have opted in, can opt out of active pension scheme membership.
 
Opting out: Opt out has a specific meaning under the new legislation. It refers to a process that, legally, has the effect of undoing an individual’s active membership of an automatic enrolment pension scheme.

Opting in and opting out are covered in detail in parts 6 and 7 of our guide (Opting in, joining and contractual enrolment and Opting out).

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P

Postponement: Sometimes also referred to as a waiting period, this is an option open to an employer. It allows them to choose to delay automatic enrolment for up to three months. It can only be used on certain dates:
 
  • the employer’s staging date - for workers employed on that staging date;

  • the first day of employment - for any worker starting after the staging date; and

  • the date a worker meets the criteria to be an eligible jobholder if this is after the staging date or the first day of employment.

For more information, see part 3 of our guide: Assessing the workforce.

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Q
 
Qualifying earnings: These are an individual’s earnings between £5,564 and £42,475 (in today’s terms), made up of any of the following components:
 
  • salary and wages

  • commission, bonuses and overtime

  • statutory sick pay

  • statutory maternity pay and ordinary or additional statutory paternity pay

  • statutory adoption pay

Qualifying workplace pension scheme (or qualifying criteria): A UK pension scheme is a qualifying scheme if it:

  • is an occupational or personal pension scheme;

  • is tax registered; and

  • satisfies the minimum requirements.

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S
 
Safeguarding individuals: Specific measures (the safeguards) have been put in place to protect individuals under the new legislation, principally to ensure that an employer does not take (or fail to take) any action that causes an individual to leave or opt out of a pension scheme. Prospective employees are also protected through measures that apply during the recruitment process. These are explained in more detail in part 8 of our guide: Safeguarding individuals.

Staging date: This is the date by which an employer is obliged to comply with the new rules about automatically enrolling employees into a pension scheme. See part 2 of our guide: Getting ready to find out how to assess your staging date.

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W
 
Worker: This has a specific meaning within the new pension legislation and is broadly defined as any individual who:
 
  • works under a contract of employment (an employee); or

  • has a contract to perform work or services personally (i.e. they cannot send a substitute or sub-contract the work) and is not undertaking the work as part of their own business.

See part 1 of our guide: Employer duties and defining the workforce for more detail.
 
Workplace pension reform: This is a name given to the Pensions Act 2008 legislation and new employer duties established under that Act. It is also used to describe the process of review and consultation that lead to this Act, which started with the Pensions Commission in 2002.

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