What are workplace pensions?

Workplace pension schemes are employer-managed plans where contributions from both you (deducted directly from your wages) and your employer gradually build your pension pot.

What are the two main types of workplace pension schemes?

If you’re unsure what type of scheme you’re in, you can find out by getting in touch with your employer or pension scheme provider.

Occupational pensions

Employers set up occupational pension schemes to provide pensions for their employees. There are 2 types of occupational pensions:

• Money purchase or defined contribution schemes. This is where your pension is put into investments (such as shares) by the pension provider so the amount you have in retirement also depends on how investments perform.
• Final salary or defined benefit schemes. This is where 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 reduced in recent years, but they're 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 occupational pensions, your employer doesn't 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.

Am I eligible for a workplace pension?

All employers have to offer a pension scheme – this is known as automatic enrolment. They also have to contribute a set amount 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 scheme at any time, usually by filling in a form and returning it to your employer or pension provider. If you opt out, your employer will need to re-enrol you every 3 years, you can opt out each time if you'd like. 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 money for retirement, as the State Pension alone isn't enough for most people to live on.

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

The minimum contribution is 8%, of which:

• 5% comes out of your take-home pay
• 3% is made up of your employer's contributions and tax relief.

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 have a couple of options. 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 you may need to 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 ways you can find them.

Find out more about tracing old pensions

When can I withdraw my pension?

In April 2015, the government introduced rules which allow everyone aged 55 and over full access to their pension pot, as well as increased choice over what to do with the money.

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

MoneyHelper provides a free guidance service, Pension Wise, backed by the government. You can book an appointment to discuss your pension options with a pension specialist.

Book a Pension Wise appointment on the MoneyHelper website

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

You can usually choose someone, such as your spouse, a family member or a friend, who'll get your pension pot if you die before reaching your scheme’s pension age. You usually need to choose this person in writing.

If you want to, you can change your nomination later down the line. But it's a good idea to check the rules of your pension scheme when making decisions relating to your pension pot.

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

Saving into a workplace pension doesn't affect your entitlement to the State Pension because your State Pension is based on your record of National Insurance contributions, which you build up over your working life.

Find out more about the State Pension