What is contractual enrolment?
Contractual enrolment is an alternative to auto enrolment
Contractual enrolment and auto enrolment
Auto enrolment is a way of being signed up to a workplace pension. Auto enrolment doesn’t need you to give permission, it all happens automatically.
Contractual enrolment is another way of joining a workplace pension. With contractual enrolment, your employment contract has all the details of your company’s pension scheme.
You may be enrolled into a pension as part of your employment contract or you might be invited to join the scheme (you will be required to complete an application form in this case). Sometimes, you have the option to not join that scheme. If that’s the case, then your company must still give you access to a workplace pension – and it will have to auto enrol you, which is why this can be confusing.
Every employer must have a pension scheme that can be used for automatic enrolment. There are reasons why an employer may want to use ‘contractual enrolment’ instead. There are differences.
Contractual enrolment and auto enrolment
Auto enrolment is a way of being signed up to a workplace pension. Auto enrolment doesn’t need you to give permission, it all happens automatically.
Contractual enrolment is another way of joining a workplace pension. With contractual enrolment, your employment contract has all the details of your company’s pension scheme.
You may be enrolled into a pension as part of your employment contract or you might be invited to join the scheme (you will be required to complete an application form in this case). Sometimes, you have the option to not join that scheme. If that’s the case, then your company must still give you access to a workplace pension – and it will have to auto enrol you, which is why this can be confusing.
Every employer must have a pension scheme that can be used for automatic enrolment. There are reasons why an employer may want to use ‘contractual enrolment’ instead. There are differences.
What are the differences between contractual and auto enrolment?
Asking permission to enrol you
If you’re an employee who’s been contractually enrolled, then your employer will have asked your permission before adding you to the scheme – usually as part of your employment contract. Otherwise, if you’re being auto enrolled as an eligible jobholder, your employer can enrol you without asking your permission. If you've been contractually enrolled and you decide to leave the scheme, then you may be automatically re-enrolled at a later date.
Deciding not to join
If your employer asks you – as part of a contract – whether or not you’d like to join a scheme, you can say no. If you decline to be contractually enrolled, then your employer will have to fulfil auto enrolment duties for you. If you are automatically enrolled, then you will be given the right to opt-out or cease membership at a later date.
Asking permission to deduct contributions
If you’ve been contractually enrolled, your employer must ask your permission to take contributions from your salary – again, this is usually written into your contract. If you’ve been auto enrolled then, in line with the Pensions Act 2008, the employer can deduct contributions from your salary without getting express permission.
Opting out and refunds
With contractual enrolment, you can leave the scheme and the rules of the scheme will determine whether you get a refund. With auto enrolment, you can opt out within the required timeframe and will receive a refund of your contributions under the Pensions Act 2008. You can leave the scheme at any time, but you would not receive any refund and you would continue to have benefits in the scheme.
Postponement
Employers cannot use postponement to delay contractual joining for employees. By way of contrast, employers can postpone auto enrolment dates – not contractual enrolment dates – by up to three months. Postponement only applies where you are being automatically enrolled for the first time and is not available for automatic re-enrolment.
What are the differences between contractual and auto enrolment?
Asking permission to enrol you
If you’re an employee who’s been contractually enrolled, then your employer will have asked your permission before adding you to the scheme – usually as part of your employment contract. Otherwise, if you’re being auto enrolled as an eligible jobholder, your employer can enrol you without asking your permission. If you've been contractually enrolled and you decide to leave the scheme, then you may be automatically re-enrolled at a later date.
Deciding not to join
If your employer asks you – as part of a contract – whether or not you’d like to join a scheme, you can say no. If you decline to be contractually enrolled, then your employer will have to fulfil auto enrolment duties for you. If you are automatically enrolled, then you will be given the right to opt-out or cease membership at a later date.
Asking permission to deduct contributions
If you’ve been contractually enrolled, your employer must ask your permission to take contributions from your salary – again, this is usually written into your contract. If you’ve been auto enrolled then, in line with the Pensions Act 2008, the employer can deduct contributions from your salary without getting express permission.
Opting out and refunds
With contractual enrolment, you can leave the scheme and the rules of the scheme will determine whether you get a refund. With auto enrolment, you can opt out within the required timeframe and will receive a refund of your contributions under the Pensions Act 2008. You can leave the scheme at any time, but you would not receive any refund and you would continue to have benefits in the scheme.
Postponement
Employers cannot use postponement to delay contractual joining for employees. By way of contrast, employers can postpone auto enrolment dates – not contractual enrolment dates – by up to three months. Postponement only applies where you are being automatically enrolled for the first time and is not available for automatic re-enrolment.
Instant changes to your
pension savings
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
Instant changes to your
pension savings
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
Smart Pension's fund choices
Smart All Stocks Index - Linked Gilts Index Fund
Aims to track the return of the FTSE Actuaries British Government Index Linked All Stocks Index, which features UK government bonds with returns linked to the Retail Price Index (RPI).
Smart Annuity Fund
Aims to invest in a way which matches the broad characteristics of investments underlying the pricing of a typical non-inflation linked annuity.
Smart Cash Fund
Aims to maintain capital and provide a return in-line with money market rates by investing in a range of money market securities denominated in sterling.
Smart De-risking Fund
This fund has been created so that it will typically suit most of our members who are approaching their target retirement age and would like a lower level of volatility than the smart growth funds.
Smart Ethical Global Equity Index Fund
Aims to track a filtered index, which excludes companies that operate in industries that breach certain ethical criteria.
Smart Future Fund
This fund aims to replicate the asset allocation, performance and risk profile of our Smart Growth Moderate fund, whilst incorporating additionalscreening criteria that revalues the weighting of each investment depending on their Environmental, Social, and Governance (ESG) score. It aims to limit the additional risks associated with ESG factors.
Smart Growth Fund - Higher Risk
This fund carries a higher risk of fluctuation to your savings but has the potential for high growth, though this is not guaranteed
Smart Growth Fund - Lower Risk
This fund carries the lowest risk of loss but also reduced likelihood of a high return, but it may be suitable if you are concerned about volatility.
Smart Growth Fund - Moderate Risk
This fund has been created so that it will typically suit most our members, it has the medium level of risk of these funds.
Smart Income Fund
Aims to provide long-term investment growth up to and during retirement, to facilitate the drawdown of retirement income.
Smart Lower Risk Fund
This fund has been created so that it will typically suit most of our members who are approaching their target retirement age and would like an even lower level of volatility than the smart growth funds and the de-risking fund.
Smart North America Equity Index Fund
Aims to track the return of the FTSE World North America Index, which provides broad exposure to companies in the North American equity market.
Smart Overseas Bond Index Fund - GBP Hedged
Aims to invest in different types of bonds, including corporate and government bonds both in the UK and overseas.
Smart Sharia Fund
Aims to create long term appreciation of capital through investment in a diversified portfolio of securities which meets Islamic investment principles.
Smart UK FTSE 100 Equity Index Fund
Aims to track the return of the FTSE 100 Index, which contains the largest listed companies on the UK stock market.
Smart World (ex UK) Developed Equity Index Fund
Aims to track the performance of the FTSE Developed (ex UK) Index, which provides broad exposure to large and mid-cap companies in the developed world, excluding the UK.
Smart World Emerging Markets Equity Index Fund
Aims to track the return of the FTSE All-World Emerging Index, which provides access to key emerging economies including Brazil, Russia, India and China.