Auto-enrolment: join a pension and get a big tax bill Your employer is unlikely to jog your memory, as the Government has told companies not to encourage opting out in any way; they face substantial penalties if they do. In its determination to get workers saving, the Government has also stipulated that any workers who initially opt out will be automatically enrolled three years later - unless they opt out again. This process will continue every three years, so if you have taken advantage of fixed or enhanced protection you must opt out every three years within a month of your automatic re-enrolment. It is not possible to put in place a permanent block on auto-enrolment, and you cannot opt out in advance of joining - you have to wait to be enrolled each time, and then opt out. "It is down to the individual," said Alan Morahan of Punter Southall, the pensions consultancy. You have to take the initiative to opt out. Ros Altmann, the director-general of Saga, calculated that someone with pension assets of £1.8m who auto-enrolled by mistake could face a tax bill of £165,000 - 55pc of the difference between £1.8m and £1.5m. It could be even worse for anyone who took out "enhanced protection" in April 2006. If someone has a £2.5m pension fund that was protected in 2006 and he or she is inadvertently auto-enrolled and forgets to opt out within the one-month window, that means a tax bill of £550,000 (55pc of £1m). "Anyone with enhanced protection from 2006, or fixed protection since April this year, whose pension savings are fully protected from the lifetime allowance, needs to be very, very careful," Ms Altmann said. Unintended pension accrual arising from auto-enrolment could prove to be terribly costly. But for many other workers auto-enrolment will be a good thing - especially those who have always meant to start a pension but never quite got around to it. Should you join? Yes," said Mr Morahan. The Government is shifting the burden of paying for retirement to workers. But he said the minimum contributions were too low - "2pc is paltry" - and that employees should consider topping them up. Ms Altmann was more cautious. While she agreed that joining was likely to be the right step for many, she said some should seriously consider opting out. "Joining is not the no-brainer that it's presented, especially by the Government," she said. If you can afford it, it's probably a good idea. But pensions are just one way to save - and a very inflexible one. Paying off debts like student loans, or a deposit for a house, could be a better use of your money. Older people on low incomes could find any pension they build up negated by means testing, she added, while those - often women - who already had small pension pots could lose the right to take them as a lump sum if they now made contributions to an auto-enrolled scheme. This is because, under the rules of "trivial commutation," anyone whose total pension savings exceed £20,000 has to use their pension to take an income, usually via an annuity. On the other hand, higher-rate taxpayers should almost certainly join, Ms Altmann said, thanks to the generous tax relief. However, 40pc taxpayers who belong to Nest, the government-sponsored auto-enrolment scheme, will have to reclaim higher-rate relief via a tax return, warned Jerry Gandhi of NOW: Pensions, and there will be a delay before any tax relief is credited to your pension fund. Nest also has contribution limits that other schemes do not have. If you are self-employed, you will not be able to join auto-enrolment, so it may be worth setting up a private pension. According to Scottish Widows, about 11pc plan to opt out of auto-enrolment, with a further 18pc undecided. The most common reason is shortage of money. Lynn Graves, head of business development at Scottish Widows, said: "As a nation we are starting to recognise we can no longer rely solely on the state to provide the majority of our income in retirement. We must wake up to the reality of how we're going to save for old age. Who is affected? Anyone aged between 22 and the state pension age who earns enough to pay income tax (currently, this means more than £8,105) will be automatically enrolled in a company's pension scheme. Those who don't meet these criteria still have a right to join and receive employers' contributions, although the company is under no obligation to enrol them automatically. Those who earn less than £5,564 a year can choose to join but have no right to employers' contributions. Those currently too young or earning too little to be auto-enrolled will automatically join the scheme when they turn 22 or start to earn more than the threshold. When will this happen? It depends on the size of the company. Those employing at least 120,000 people will start enrolling all eligible employees on October 1 this year, although they are allowed to delay this by three months. Smaller companies will follow suit later; by this time next year all firms employing 1,250 or more will have joined. Some small firms, or new companies, won't start enrolling until 2017 or 2018. Full details: thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx. To start with, you will pay in a minimum of 1pc of salary (although you get tax relief on this). The employer will top this up to a minimum of 2pc in total. In 2018 the minimum total contribution rises to 8pc, of which at least 3pc must come from the company. But you can increase your contributions up to the normal limits (your salary or £50,000, whichever is lower), and your employer may match your extra payments. I already belong to a workplace pension. Will anything change? As long as your scheme meets the minimum standards for auto-enrolment, nothing should change. Will I get a choice of funds? It depends on which pension scheme manager your employer chooses. Some will offer you a choice; The People's Pension, for example, has a range of five: "adventurous" (50pc UK equities, 50pc overseas equities), "balanced" (80pc shares, 20pc bonds), and "cautious" (60pc shares to 40pc bonds), plus sharia and ethical options. But NOW: Pensions, an offshoot of a long-established Danish scheme, offers a single diversified growth fund, which switches to less volatile assets in the run-up to retirement. What are the charges? What if I change job? This depends on who runs the pension scheme for your employers. Some are "multi-employer," some are not. You may find that you have to join your new company's scheme and leave your previous fund where it is. Potentially, people could end up with a series of small pension pots if they keep changing jobs, although the Government is looking at making the system more flexible. Can I change my mind about enrolling? You can leave at any time, although any pension built up will stay in place - you will not get your contributions back. You can also join at any time if you have previously opted out. Is Nest the same as auto-enrolment? No, it's just one possible provider of auto-enrolled pensions, along with The People's Pension, NOW: Pensions and others.