Workplace pensions

A workplace pension is sometimes called an occupational scheme and your employer often provides it. It's a way of saving for your retirement arranged by your employer.

How they work

Every payday, a percentage of your wages is automatically put into the scheme. You may also get tax relief from the government. Your employer also contributes money to the scheme. 

There are two types of workplace pension. An  Occupational & Group Personal Pension/ Stakeholder pension.

Auto-enrolment

All employers must provide a workplace pension if you're eligible. This is called auto-enrolment. The largest provider is called Nest. Your employer must auto-enrol you if you meet the following criteria:

• You're classed as a worker
• You're between 22 and the state pension age
• Not already in a qualifying scheme
•  Earn more than £10,000 a year
• Ordinarily employed in the UK

 

Your employer doesn't have to enrol you if you don't meet these criteria. Such as the following:

• If you or your employer give notice that you're leaving your job
• You've already taken a pension from your employer that meets the auto-enrolment rules
• You opted out
• You're in a Limited Liability Contract

 

You can still join their pension if you want. In fact, your employer can't refuse, discriminate or unfairly dismiss you for being in a Workplace Pension. They also can't encourage/force you to opt-out.

What happens when you auto-enrolled?

Your employer must tell you:

• The date they added you
• The type of scheme & who runs it
• How much you both contribute
• How to leave if you want to
• How tax relief applies to you

 

What you and your employer pay

You and your employer must both pay a percentage of your earnings. The amounts depend on the scheme you're using. You must pay at least 5% and your employer at least 3%. Usually, increasing the percentage you spend increases the rate they pay.

The advantages

Workplace pensions have many more advantages compared to personal pensions:

• Convenience
• More contributions
• It's managed for you

 

Can I have both a workplace pension and a personal pension?

There is no limit to how many pensions you can have. The only restrictions are how much you can pay per year. Either £40,000 or 100% of your salary, whichever is lower per tax year.

Opting out

You can opt-out, but generally, it's not a good idea. You may feel that you have more take-home pay by not joining. However, you'll miss out on tax relief and employer contributions. Effectively turning down "free money" and depriving yourself of income later in life. 

Talk to a financial advisor if your savings are close to the lifetime allowance.  If you are looking to join. We have a range of advisors who specialise in pensions. Who can help  you make the best choice.