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Opting out is when a staff member decides to leave your pension scheme within a month of being enrolled.

The rising cost of living may be affecting your client's staff. Some may approach you or your client for help if they feel they can no longer afford to pay into their pension. Others may look to access cash from their pension pot to pay essential bills. Both scenarios carry risk.

We strongly advocate the importance of saving into a pension and we urge savers to maintain their pension contributions. For some, stopping contributions could have a serious impact on retirement living standards.

You should refer those who are worried about money to the government-backed MoneyHelper service which can help them manage their money in uncertain times.

You should also direct anyone looking to transfer money from their pension to the ScamSmart website. This will help them get to know the warning signs of a scam and check the firm that they are dealing with.

Staff that have been enrolled and those who have opted in can choose to opt out.

Your client must not actively encourage their staff to opt out of their workplace pension (which could be considered an inducement). Any decision to opt out must be taken freely by the staff member without influence from the employer.

Key points

  • staff who have been automatically enrolled or who have opted in have the right to opt out
  • the decision to opt out of the workplace pension must be taken freely by the staff member
  • staff cannot opt out until after they’ve been automatically enrolled
  • the opt-out period is one month from when active membership is created, or they receive their letter with the enrolment information, whichever is latest
  • staff opt out by getting an opt-out notice from the pension scheme which they then complete and give to their employer
  • the employer must issue a full refund of any contributions the staff member has made into a pension scheme within a month of receiving a valid notice

The opt-out period

Once staff have been enrolled into the pension scheme, they have one calendar month during which they can opt out and get a full refund of any contributions. This is known as the opt-out period. It starts from whichever date is the later of:

  • the date active membership was achieved
  • the date they received a letter from their employer with the enrolment information

Staff can’t opt out before the opt-out period starts or after it ends. If they decide to leave the scheme outside this period, they will instead be ceasing active membership. Whether they get a refund of contributions will depend on the pension scheme rules.

When someone opts out

Staff opt out by giving their employer an opt-out notice. The opt-out notice is provided by the pension scheme. This is to avoid any employer involvement in the decision to opt out, which could lead to a breach of the law. With some pension schemes, you can arrange for the staff member to complete the opt-out notice online.

If your client gets an opt-out notice, check it’s valid. That means it contains all the statutory information required. If any of the information listed is missing, your client must tell the staff member who will have to resubmit the notice. The opt-out period is extended to six weeks if the notice is invalid, to allow the staff member enough time to correct it.

When a staff member opts out, your client must stop payroll from deducting any further contributions straight away.

If your client’s payroll software is processing opt outs, they need to ensure that the system calculates the opt-out period correctly – check this with the pension scheme.


Your client must give the staff member a full refund of any contributions the staff member has made within a month of them opting out. Your client’s payroll will have a record of how much this is. Normally, your client should issue the refund in the next payroll after they get the opt-out notice.

The pension scheme will refund to your client any contributions it’s received for that staff member.

Your client shouldn’t wait for the scheme to refund them before they refund their staff member as this could mean they miss the one-month deadline.

Statutory information to be included in the opt-out notice

For an opt-out notice to be valid, it must contain all of the information below.

If it doesn’t, your client must give it back to the staff member and ask them to resubmit it. The opt-out period will be extended to six weeks to allow them to provide a valid notice.

About the member of staff

  • full name
  • name of the employer
  • National Insurance number or date of birth
  • signature or, if in electronic format, a statement confirming that the jobholder personally submitted the notice
  • date the jobholder completed the form

Statements and warnings

The notice should include the following just above their signature:

  • ‘I wish to opt out of the pension scheme’.
  • ‘I understand that if I opt out I will lose the right to pension contributions from my employer’.
  • ‘I understand that if I opt out I may have a lower income when I retire’.

The notice must also contain a section called ‘what you need to know’ with the following statements included:

  • Your employer cannot ask you or force you to opt out.
  • If you are asked or forced to opt out, you can tell The Pensions Regulator.
  • If you change your mind, you may be able to opt back in – write to your employer if you want to do this.
  • If you stay opted out of the scheme, your employer will normally put you back into pension saving in around three years.
  • If you change your job, your new employer will normally put you back into pension saving straight away.
  • If you have another job, your other employer might also put you into pension saving, now or in the future. The notice only allows you to opt out of pension saving with the employer you name in the notice. A separate notice must be filled out and given to any other employer you work for, if you wish to opt out of that employer’s pension saving as well.

Advanced guidance

These resources are aimed at professional advisers and employers with in-house pensions professionals.