Workplace Pension

Save for retirement. Your savings can be invested in shares, bonds, property or cash. The final value of your workplace pension is based on how much you and your employer pay and the performance of your investments.

Workplace Pension

A workplace pension is a tax-efficient way of saving for your retirement. There are limits on how much you can save, but generally, your employer will deduct a percentage of your earnings and pay them directly to your pension. The minimum contribution to a workplace pension is 8% of your basic pay, of which your employer must spend a minimum of 3%. 

It’s a good idea to start saving for retirement as soon as poss. Your savings will be invested in various assets, including cash, fixed interest, shares and property. The longer the time you invest, the better the outcome.

You can start withdrawals from your savings as early as 55 (57 from 2028). 

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Your pension savings grow free from all personal taxes.

Your pension savings can be paid as a tax-free lump sum to your loved ones if you die before retirement (or 75, whichever is earlier).

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Frequently Asked Questions

The information provided in these FAQs does not constitute professional financial advice. We strongly recommend that you consult a professional adviser before proceeding with a financial transaction.

What happens to my pension when I retire?

When you reach 55 (57 from April 2028), you have three options:

1. Take your pension fund as a lump sum.

2. Use it to buy an annuity (a guaranteed income).

3. Take your pension commencement lump sum and transfer your savings balance to a flexible access drawdown plan. You can then draw either regular or variable income.

Am I eligible for a workplace pension, and what will I pay?

If you earn more than £10,000 a year and you’re aged between 22 and your state pension age, you’ll be automatically enrolled in your workplace pension scheme. It’s arranged for you by your employer. Both you and your employer must pay into it under The Government’s Auto Enrolment Rules (unless you opt-out).

A workplace pension is usually a defined contribution scheme. This means the value of your pension pot when you retire will depend on how much you and your employer pay into it and how the investments perform.

Your employer will give you information about your workplace pension scheme. This will tell you how much your employer will pay for you. The minimum payment is 8% x your salary, of which your employer must pay a minimum of 3%. Your employer might match your contributions if you want to pay more than the minimum.

What happens If I change jobs in the future?

It’s common for people to change jobs frequently, and this can lead to the build-up of retirement savings in multiple pension pots. If this sounds familiar, it may not be easy to monitor how your pension savings are doing and whether your pension investments are still suitable for you.

What’s the difference between my workplace pension and a defined benefit pension?

Your employer may offer a defined benefit pension. Defined benefit pensions are different to defined contribution pensions. With a defined benefit pension, your pension is based on the years you’ve been a member of the scheme and your salary (either your salary in the last few years you worked or an average of your salary throughout your career). This type of pension is expected in the public sector but is now a rarity in the private sector.

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Neil Jenkins owner of Fintegrity

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The Workers’ League House, 44-50 Royal Parade Mews, Blackheath, London, SE3 0TN