Your employer has to offer a workplace pension scheme by law. They have to automatically enrol anyone who’s eligible - this is called automatic enrolment.
On this page you can find basic information about:
A workplace pension scheme is a way of saving for your retirement through contributions deducted direct from your wages. Your employer may also make contributions to your pension through the scheme. If you are eligible for automatic enrolment, your employer has to make contributions into the scheme.
Most schemes will also provide other benefits, for example, support for your partner if you die.
There are two types of workplace pension schemes:
Occupational pension schemes are set up by employers to provide pensions for their employees. There are two different types of occupational pensions:
Final salary pension schemes can also be called defined benefit schemes. In a final salary scheme, your pension is linked to your salary while you're working, so it automatically increases as your pay rises. Your pension is based on your pay at retirement and the number of years you have been in the scheme. Your pension entitlement doesn’t depend on the performance of the stock market or other investments.
In most final salary schemes, you pay a set percentage of your wages towards your pension fund and your employer pays the rest. This means it's usually a good idea to join a final salary scheme if your employer offers one. However, final salary schemes are becoming less common and most employers no longer offer them.
Money purchase schemes can also be called defined contribution schemes. The money you pay into the scheme is invested with the aim of giving you an amount of money when you retire. Your pension is based on the amount of money paid in and on how the investments have performed. You'll usually pay a percentage of your wages into the scheme and your employer may also pay a regular amount in but this isn't always the case. However, your employer may have to offer you automatic enrolment into a workplace pension, in which case they will be obliged to make contributions.
If you're offered a money purchase scheme through the workplace, it can be a good idea to join if your employer makes contributions. However, if your employer isn't going to make any contributions to the pension or you are not yet eligible for automatic enrolment, you may want to compare the benefits of the scheme with personal pensions schemes elsewhere.
For more information about personal pensions offered outside the workplace, see choosing a personal pension.
As well as a pension when you retire, occupational pension schemes often offer other benefits such as:
Your employer must enrol you into their workplace pension if you're an eligible employee -this is called automatic enrolment. You'll be eligible if you're:
You can opt out of your workplace scheme but it's a good idea to pay into it if you can afford to. This is because your employer has to make a contribution into the scheme as well as you. Also, you’ll get tax relief on the contributions you make into the scheme.
You should get information about any workplace scheme you are entitled to join within two months of starting work. If you don't, contact your personnel or human resources (HR) department.
There are different types of workplace pension schemes with different benefits. It's important to understand the differences so that you can work out whether or not the scheme is right for you and what other options you may have.
You can find a tool to help you choose whether to automatically enrol into your workplace pension on the Money Advice Service website.
If you're already in a workplace pension that meets the rules about automatic enrolment, you don't have to join another pension.
You can find more information and frequently asked questions about automatic enrolment on the Department for Works Pensions (DWP) website at www.dwp.gov.uk .
You can also find more on joining a workplace pension automatically on the Gov.UK website at www.gov.uk.
Workplace (or group) personal pensions and stakeholder pensions work in a similar way to the ones you can arrange for yourself.
Your employer chooses the pension provider but you will have an individual contract with the pension provider.
Group personal pensions and stakeholder pensions may be an option if you are not eligible to automatically enrol into your workplace pension.
You pay contributions into your pension fund direct from your wages. The money is invested to grow your fund which you use to provide you with a pension when you retire.
The main difference between arranging a personal or stakeholder pension yourself and joining one through your workplace is the amount of control you have over how the money you pay into your fund is invested. With a workplace scheme, the investment choices may be made for you by the provider.
Your employer may also pay contributions into a personal or stakeholder pension but they do not have to - this will depend on the terms of the pension. If your employer won't be contributing, compare what the workplace pension offers with other similar pensions on the market to make sure you're getting the best deal.
Find out more about see choosing a personal pension.
You may also want to consider getting independent financial advice.
It's a good idea to get basic information about what your employer is offering when you start work, to help you decide if it's worth you joining the pension scheme. Here's some things to find out:
The amount of your contributions should appear on your wage slip each time you are paid and on your P60 tax information each year. If you think your payments are wrong, speak to your employer straight away and ask them to sort it out.
If you are in a union, they may provide advice and help about your pension scheme.
Once you've decided to join your workplace pension scheme, it's best to join as early as possible to get the maximum benefit from your contributions. Some pension schemes don't let you join later, once you've said you don't want to join, so check the rules before you decide.
If you're not sure what the rules are for your scheme, ask your Human Resources (HR) or personnel department or your Union if you're in one.
There's no limit to the amount you can save up in your pension schemes. This means you can join a workplace pension scheme even if you've already got money saved up in another pension fund or you're still paying into another fund, such as a personal pension.
There are limits to how much tax relief you can get on the contributions you make to your pension, so if may not be worth paying more than you will get tax relief on.
If you're going to pay into more than one pension fund, you should work out your budget to make sure you can afford the payments before you join. You can get more information from the Money Advice Service website at www.moneyadviceservice.org.uk.
For more information on how to work out your budget, see Budgeting.
What you do about your pension when you change jobs depends on what types of scheme you have joined. You may choose to:
It can be difficult to make the right decision without advice, even when you have all the information you need. So unless you are absolutely sure, you should get professional independent financial advice.
There are special rules about what happens to your pension if you have automatically enrolled into a workplace pension and you leave your job. You can find more on the DWP website at www.dwp.gov.uk/faqs and at www.dwp.gov.uk/keyfacts .
For more information about how to find a financial adviser, see Getting financial advice.
Don't forget to let your old pension provider know where you are if you change address later on. It's easy to lose touch and this can make things more difficult when you retire.
The Money Advice Service website has guidance on what to do if you are thinking about transferring a pension at www.moneyadviceservice.org.uk.
Pension scams have become more common since April 2015, when new rules allowed people to take some or all of their pension pot as a lump sum. These scams are fake investments designed to con you out of your money. They are often extremely convincing and anyone can be caught out.
You can find out about scams on the MoneyHelper website.
Pension Wise is a free and impartial service to help you understand what your pension options are.
You can find out about Pension Wise on the MoneyHelper website.
You can book a free appointment with a pensions guidance specialist who will talk through your pension options with you. Appointments will be either over the phone or face to face with specialists from Citizens Advice.
An appointment will be relevant to you if:
Book a Pension Wise appointment on the MoneyHelper website, or call 030 0330 1001 between 8am and 10pm, Monday to Sunday. You can also book an appointment by visiting your nearest Citizens Advice.
For more information about personal pensions and to find out about other types of pensions, see Pensions.
The Money Advice Service is a free, independent service. Their website has lots of useful information about pensions including comparison tables for choosing a personal pension provider and a pension calculator for working out how much pension you'll need. There's also a range of leaflets to help answer your pensions and retirement questions.
Go to: www.moneyadviceservice.org.uk.
You can get free, confidential information and advice on occupational and personal pensions on the Money Helper website. They also have an advice service which deals with stakeholder pensions. They don't provide financial or investment advice or recommend products.
GOV.UK is the government website. It has lots of information about the state retirement pension and other types of pensions.
Go to: www.gov.uk
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