Auto-enrolment is a new government initiative to encourage people to save for their retirement.

Over the next few years, employers will have to provide a pension scheme for their eligible employees, who are over 22 and earn more than a minimum amount. These pension schemes will also automatically enrol qualifying employees – which is why it's called 'auto enrolment'. The government has introduced this because a lot of people haven’t been saving for their retirement, relying instead on the state pension and other state benefits. With auto-enrolment, you're encouraged to save as much money as you can while you are still working so that your pension funds have a chance to grow – giving you a better level of income during retirement.

Auto-enrolment will mean that you are automatically enrolled to your employer's qualifying pension scheme. Unless you choose to opt out, at least 3% of your wages will be automatically saved into the work based pension scheme– and the good news is that your employers will put at least 3% into your pension too. The government will contribute too, by way of tax relief on your pension contributions.

Your employer will chose a pension scheme in to which the contributions will be made, this could be from a number of different pension providers with qualifying requirements or NEST (National Employment Savings Trust) which is a government backed scheme all companies are eligible to join. Larger organisations will need to comply with auto-enrolment from 2012, with medium and smaller organisations being affected over the next few years up to 2017.

Do I have to invest in a pension?
Investing some of your wages into a pension fund is a good idea. It’s important to make informed decisions about the money you save. Only you can decide whether or not you’d prefer to have the money going into a work based pension or a different pension scheme. An independent financial adviser (IFA) can tell you more about auto-enrolment, NEST and other pension funds, and explain the options you’ll have when they are fully introduced.

Questions you might like to ask an IFA…

If I opt out of my company’s pension scheme, what are the implications?

Would it be more cost-effective to build my pension fund in a work based pension?

Will I have the same choices in a work based pension scheme as, say, a personal pension?

How much of my spare cash should I contribute to a pension?