Workplace pensions

The State Pension can help to cover your basic needs in retirement, but some extra money from a pension scheme can make retirement more enjoyable. Most employers must offer workplace pensions and should automatically enrol you if you’re eligible.

What is a workplace pension?

Workplace pension schemes are run by employers. Your pension pot is based on contributions taken directly from your wages, as well as your employer’s contributions.

There are two main types of workplace pension schemes:

• Occupational pensions
• Group personal pensions

Occupational pensions

Employers set up occupational pension schemes to provide pensions for their employees. There are two types of occupational pensions.

• Money purchase or defined contribution schemes: your pension is put into investments (e.g. shares) by the pension provider so the amount you have in retirement also depends on how investments perform.
• Final salary or defined benefit schemes: your pension is based on your salary and how long you’ve worked for your employer. The pension provider pays you a certain amount every year when you retire. Your pension pot doesn’t depend on investments. The number of employers offering these schemes has been in decline in recent years, although they are still common across much of the public sector.

Group personal pensions

Your employer chooses a pension provider to run a group personal pension scheme, but your pension is an individual contract between you and the provider. As with an occupational pension your employer does not have to make contributions.

Your pension pot grows using your contributions, any of your employer’s contributions, tax relief and investment returns. Group personal pensions are a type of defined contribution pension so the amount you have in retirement also depends on how investments perform.

If you’re unsure what type of scheme you’re in, contact your employer or pension scheme provider to find out.

Am I eligible for a workplace pension?

All employers must offer a pension scheme that’s subject to minimum regulatory and governance requirements. This is known as automatic enrolment. They must also contribute a set proportion of your wage to your pension pot.

You’ll be automatically enrolled into a scheme if:

• you’re aged over 22
• you’re under State Pension age
• you earn more than £10,000 a year
• you’re not already in a workplace pension scheme
• you work in the UK.

You can opt out of the pension at any time, usually by completing a form and returning it to your employer or pension provider. If you opt out, your employer will be required to re-enrol you every three years, at which time you’ll need to opt out again if you don’t wish to save. If you can afford to, it’s a good idea to join the scheme.

The Government has created automatic enrolment to encourage people to save additional money for retirement, as the State Pension alone is a low amount to live on for most people.

How much do I need to contribute to my pension pot?

The minimum contribution is currently 2%. Of this total:

• 0.8% comes out of your take-home pay
• the rest is made up of your employer's contributions and tax relief.

After April 2018, the minimum rates will change and both employee and employer contributions will go up. You can also make additional payments if you want to.

What happens to my pension pot if I change jobs?

If you change jobs, you can:

• leave the pension in your old employer’s scheme and access it once you reach the scheme’s pension age.
• transfer money to your new workplace pension scheme. This isn’t possible for all schemes so talk to your pension provider or an independent financial adviser about your options.

If you’ve lost track of old pensions or you’re not sure if you were enrolled in an old workplace pension scheme, there are different ways you can find them.

See our section on Tracing lost pensions

Contact the government’s Pension Tracing Service

When can I withdraw my pension?

In April 2015, the Government introduced new rules which allow everyone full access to their pension pot from age 55, as well as increased choice over what to do with the money.

When accessing your pot, it is worth thinking about how you will fund the future of your retirement, and avoid making any hasty decisions that may leave you worse off in the long-term.

The Government provides a free guidance service, Pension Wise, which can help explain your options in more detail. You can make an appointment over the phone or at a face-to-face session.

See our section on Pension pot options to see what you can do with your money upon retirement

Can I leave my pension pot to my spouse or family?

You can usually choose someone, such as your spouse, family or friends, who will get your pension pot if you die before reaching your scheme’s pension age. You usually need to do this in writing, and can change your nomination. Check the rules with your pension scheme.

Will I still get the State Pension if I have a workplace pension scheme?

Saving into a workplace pension does not affect your entitlement to the State Pension. How much State Pension you qualify for is based on your National Insurance contributions record.

What should I do next?

Visit the Pensions Advisory Service website or contact their helpline on 0300 123 1047 for more information about pensions

Use the Money Advice Service online calculator to work out how much you and your employer will each put into your pension pot