A workplace pension is a way of saving for your retirement that’s arranged by your employer. Some workplace pensions are called ‘occupational’, ‘works’, ‘company’ or ‘work-based’ pensions.
How they work
A percentage of your pay is put into the pension scheme automatically every payday. In most cases, your employer and the government also add money into the pension scheme for you. The money is used to pay you an income for the rest of your life when you start getting the pension. You can usually take some of your workplace pension as a tax-free lump sum when you retire. If the amount of money you’ve saved is quite small, you may be able to take it all as a lump sum – but if you pay Income Tax, you’ll have to pay tax on the lump sum.
Workplace pensions and the State Pension
Today the maximum basic State Pension you can get is £115.95 per week for a single person. The money you get from a workplace or other pension could make it much easier for you financially when you’re retired.
From their respective staging dates, an employer must automatically enrol workers into a workplace pension scheme if they:
- are aged between 22 and State Pension age
- earn more than £10,000 a year
- work in the UK
This is called ‘automatic enrolment’.
If you’re already in a workplace pension scheme, you may not see any changes. Your workplace pension scheme will usually carry on as normal. But if your employer doesn’t make a contribution to your pension now, they will have to by law when they ‘automatically enrol’ every worker.
If you have any concerns on this area, please contact us for further information.