Workplace Pension

1. What Is a Workplace Pension?

A workplace pension is a pension plan arranged by your employer. It allows you to save money for your retirement, with contributions made by both you (the employee) and your employer

2. Eligibility for Auto-Enrolment

You will be automatically enrolled into your employer’s pension scheme if you meet these conditions:

• Age: You must be 22 or older but under the state pension age.
• Income: You must earn at least £10,000 per year.
• Workplace: You must work in the UK.

If you meet these conditions, your employer must automatically enroll you in a pension scheme and start making contributions.

3. Contribution Rates

• Employee Contribution: You will contribute a percentage of your qualifying earnings (between £6,240 and £50,270 for 2024/25). The minimum contribution you need to make is 5% of your qualifying earnings.
• Employer Contribution: Your employer will contribute at least 3% of your qualifying earnings.

The total minimum contribution (your contribution + your employer’s contribution) is 8%.

• Qualifying Earnings: This refers to earnings between £6,240 and £50,270. If your salary is higher or lower than this range, the contribution may be different.

4. Opting Out

If you don’t want to participate in the pension scheme:

• Opt-out: You can opt out of the scheme. However, you must do this within one month of being enrolled to receive a full refund of any contributions made during that time.
• Re-enrolment: Even if you opt out, your employer must automatically re-enrol you in the scheme every 3 years, giving you another opportunity to decide whether you want to continue saving for retirement.

5. How Contributions Work

• Employee Contributions: The money is deducted directly from your salary before tax, meaning it reduces the amount of income tax you pay
• Employer Contributions: Your employer will make their contributions on top of your own, which helps boost your pension pot.

6. Tax Relief on Contributions

• Contributions made to your pension are eligible for tax relief. This means the government will add back some of the money you’ve paid in tax, depending on your income tax rate.

For example:

• If you pay basic rate tax (20%), for every £80 you put into your pension, the government will add £20, making the total contribution £100.

7. How the Pension Grows

• The contributions from you and your employer are invested in the pension fund, and over time, the value of your pension pot will grow (or decrease, depending on how the investments perform).
• Your pension is usually a defined contribution plan, meaning the final amount you will have when you retire depends on how much has been contributed and how well the investments have performed.

8. When Can You Access Your Pension?

• You will be able to start accessing your pension savings at age 55 (from 2028, this will rise to age 57).
• You can choose how to take your pension when the time comes—whether as a lump sum, through regular withdrawals, or by purchasing an annuity.

9. Can You Choose Your Pension Provider?

In some cases, you may have the option to choose your pension provider, but typically, your employer will select one for you. You will be automatically enrolled into that scheme.

10. Information from Your Employer

• You should receive a letter or email when you are enrolled, detailing how the pension works, the contributions, and the provider.
• If you’re eligible for auto-enrolment, the employer must provide you with information about your rights, how much will be contributed, and how you can opt out.

11. Changing Jobs

If you move to a new job, your new employer may automatically enroll you in their workplace pension scheme as well. You can transfer your pension pot from your old job to the new one, or you can leave it where it is.

Know more about workplace pensions, Visit – GOV.UK