How do you ‘Opt out’ of pension

‘Opt out' or 'cease membership', what's the difference?

If staff want to leave the pension scheme, then there are two ways to do this. One is called 'opting out'. The other is 'ceasing membership'.

It's confusing because people say 'opt out' all the time, but the name for how a staff member leaves a pension scheme changes, depending on when they joined. It all depends on how long they have been enrolled into the scheme and whether they were automatically enrolled.

What is opting out?

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

If they want to leave the scheme very soon after being automatically enrolled, it’s known as ‘opting out’. This can only happen if they have been a member of the scheme for less than one calendar month. In this situation, the employer will refund any money paid into the scheme.

What is ceasing membership?

It's known as 'ceasing membership' if a staff member has been a member for more than one month

If staff want to leave the scheme after being a member for one month or more, then it's called 'ceasing membership’ instead. No refund of money is due in this situation, but staff will have access to their savings after reaching retirement.

How to opt out of a Pension scheme

Staff opt out by contacting the pension provider directly (you as the employer/we as your payroll provider cannot do this on their behalf) . 

The opt-out notice is provided by the pension provider, however the process varies from one provider to the next. 

This process 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 or via a phone call.


Links for Pension Providers

Smart Pension: Click here

NEST: Click here

Peoples Pension: Click here

NOW Pension: Click here