A workplace, or company, pension scheme is a pension that\u2019s arranged by your employer. It\u2019s different from a private pension<\/a>, which you choose and pay into yourself. Usually, you\u2019ll be automatically enrolled into a workplace pension when you join a new company. Both you and your employer will make monthly contributions. It can be one of the simplest ways to put money away for retirement.<\/p> Typically, to be able to join your workplace\u2019s standard pension scheme and benefit from employer contributions, you must meet the following criteria:<\/p> If you are aged between 22 and state pension age and earn more than \u00a310,000 per year, you will be regarded as an \u201celigible jobholder\u201d and will be enrolled in your workplace scheme automatically. Those that fall outside of these thresholds (but who still meet the basic criteria in the bullets above) are dubbed \u201cnon-eligible jobholders\u201d. Somewhat confusingly, this doesn\u2019t mean you aren\u2019t eligible to join the scheme (and benefit from employer contributions). It simply means that you aren\u2019t automatically enrolled, and have to ask to join.<\/p> No. It doesn\u2019t matter whether you are a part-time or full-time employee. As long as you meet the criteria outlined above, you can be enrolled in your employer\u2019s pension scheme and benefit from its contributions to your pension. If you have more than one part time job for which you meet the eligibility criteria, this could mean you have more than one workplace pension.<\/p> If you are aged between 16 and 74, work in the UK for an employer, and earn less than the lower earnings amount (\u00a36,240 a year), you can still ask to join a workplace pension scheme. However, it doesn\u2019t have to be the same pension as employees that earn more than this amount. Your employer could arrange for you to be enrolled in a group personal pension (where your employer chooses the provider on behalf of employees, but the contract is between you and the pension provider), or another type of pension. Your employer doesn\u2019t have to contribute to your pension, though it may choose to do so.<\/p> If you don\u2019t meet even the criteria above (for example, if you\u2019re older than 74, or mainly work abroad) you don\u2019t have any rights to join a UK employer\u2019s scheme. If this is the case, you can choose to save for retirement with a private pension<\/a>.<\/p> There are 2 types of workplace pension: defined contribution schemes, which are now the most common type of workplace pension, and defined benefit pensions. The latter are becoming increasingly rare outside of the public sector.<\/p> With defined contribution<\/a> (DC) pensions, the contributions to your pension pot are invested by the pension provider. They\u2019re also known as money purchase schemes. The idea is that the investments will grow enough over time to provide a worthwhile return to help fund your retirement. Of course, investment performance is not guaranteed \u2013 nor is the value of your pension pot when you retire.<\/p> When the time comes to withdraw your pension savings, you can take the cash out (all at once, or gradually over time), leave most of it invested and take just enough for an income (income drawdown), or use it to buy an annuity. Unless you work in the private sector or, in some cases, for a large and well-established firm, anyone starting at a new company will almost certainly be enrolled in a defined contribution pension.<\/p> These pay out a fixed, regular income when you retire, based on a proportion of your salary when you were at the company. The percentage is calculated based on the years you\u2019ve worked at a company. Outside of the public sector, defined benefit (DB) schemes are becoming increasingly rare. That\u2019s because the company has full responsibility for ensuring there\u2019s enough money in the pot to pay retired employees\u2019 pension income. This is more expensive than DC pensions, where what you get at the end is down to the success of your pension investments.<\/p> Even if you joined a company on a DB scheme, many have moved or are moving employees over to DC schemes. If so, your pension with a single company may be split into 2 parts \u2013 an older DB scheme and a newer DC scheme.<\/p> There are 2 types of defined benefit scheme you might come across:<\/p> Ask most pension experts which is better and most are likely to come down on the side of defined benefit pensions. Final salary pensions, in particular, are often referred to as \u201cgold-plated\u201d pensions. That\u2019s because, unlike DC pensions, your income is guaranteed for life, and usually at a higher level than you can hope to achieve by saving into a defined contribution pension. Plus, your pension income payments are usually \u201cindex-linked\u201d, which means that your income will rise each year to keep up with rising prices. Many will also pay a reduced level of income to any surviving spouse, partner or dependant when you die.<\/p> In short, if you have a defined benefit pension, it\u2019s well worth hanging on to.<\/p> No! This is one of the biggest benefits of paying into a workplace pension, or indeed any pension. Subject a maximum annual allowance (usually \u00a360,000, or the equivalent to your salary if this is lower), the money that the government would usually take in tax goes towards your pension pot instead. The tax relief you get is dependent on your rate of income tax.<\/p> For workplace pensions, this can work in 1 of 2 ways. Your employer chooses which method it uses.<\/p> One of the biggies is that tax relief we just mentioned. A pension is pretty much the only saving vessel that benefits from such generous tax breaks. ISAs, too, have tax benefits \u2013 but just that you don\u2019t pay tax on any interest earned. You\u2019ll still typically have paid tax on the money you put in to start with.<\/p> Other advantages of saving into a workplace pension include:<\/p> If you\u2019ve joined your pension under the government\u2019s pension auto-enrolment policy either automatically or because you\u2019ve requested to join, there are rules on the minimum amounts that you and your employer must contribute based on what\u2019s known as your \u201cqualifying earnings\u201d (your pre-tax earnings of between \u00a36,240 and \u00a350,270 a year, as of the 2024-25 tax year). These contributions must usually add up to 8% of your qualifying earnings, broken down as follows.<\/p> In some cases, your employer may choose to contribute a higher percentage. If so, you may be able to contribute a lower amount, provided that the total adds up to 8%.<\/p> With some schemes, in particularly defined benefit schemes, contribution levels by both you and your employer may be higher.<\/p> If you earn less than the minimum earnings threshold of \u00a36,240 a year for 2024-25, your employer doesn\u2019t have to contribute anything to your pension (though it may still choose to). You\u2019re likely to have more say over how much you contribute.<\/p> In most cases, yes, though how much more will depend on the terms of your workplace scheme. Speak to your employer to find out what is possible. In some cases, your employer may increase its own contributions if you pay extra in yourself. Bear in mind that if you build up more than \u00a360,000 a year across all of your pension pots (or the equivalent of your annual earnings, if this is lower), any excess won\u2019t benefit from tax relief.<\/p> Workplace pensions are run by employers. While your employer will use an underlying pension scheme provider to manage the investment of their employees\u2019 pension savings, an employee\u2019s pension relationship will almost always be directly with their employer. You shouldn\u2019t ever need to contact the organisation that manages the investments.<\/p> There may be an exception to this rule if you don\u2019t meet the criteria for enrolment in your employer\u2019s main pension scheme, and it has set you up in a group personal pension or stakeholder pension scheme that it\u2019s arranged. In this case, you will have an individual contract with the pension provider.<\/p>Who is eligible for a workplace pension?<\/h3>
Do I have to be working full time for a workplace pension?<\/h4>
Are any employees not able to enrol in their workplace pension?<\/h3>
What types of workplace pension are there?<\/h3>
What is a defined contribution pension?<\/h4>
What is a defined benefit pension?<\/h4>
Defined benefit or defined contribution: Which one is better?<\/h3>
Do you pay tax on workplace pension contributions?<\/h3>
What are the advantages of saving into a workplace pension?<\/h3>
How much must I and my employer pay into a workplace pension?<\/h3>
Where does the contribution come from?<\/th> Percentage of earnings<\/th><\/tr><\/thead> Your employer<\/th> 3%<\/td><\/tr> Your pay packet (after tax)<\/th> 4%<\/td><\/tr> Tax relief from government<\/th> 1%<\/td><\/tr> Total<\/th> 8%<\/td><\/tr><\/tbody><\/table> Can I pay extra into my workplace pension?<\/h3>
Who manages my workplace pension?<\/h3>