What is the workplace pension?
A pension is a financial product that you invest in. You can then withdraw money from it when you’ve retired. There are many types of pensions available, as well as pension tools and resources.
Pension schemes were set up in the late nineteenth century, providing nurses, civil servants, teachers and police with cover. The UK Government introduced the first ‘old age’ pensions in 1908, making them available to men over 70 years old. After the Second World War, the Old Age and Widows’ Pension act included pensions for women, that is, for unmarried women and widows of men who had been insured. Employers today typically offer workplace pensions.
If you’ve been making National Insurance contributions (NICs) or receiving National Insurance (NI) credits for 30 qualifying years, you may be eligible for a state pension.
Automatic enrolment into the workplace pension
New workplace pension rules encourage automatic enrolment. This means that your employer should automatically enrol you into a workplace pension scheme. To check your eligibility for workplace pensions, you need to see if:
- you’re classed as a 'worker'
- you’re aged between 22 and State Pension age
- you earn a minimum of £10,000 per year
- you normally work in the UK.
There are some exceptions, though. Employers don’t have to contribute if you earn the following amounts or less:
- £503 per month
- £116 per week
- £464 per 4 weeks
Benefits of automatic enrolment in workplace pension schemes:
- You’ll be signed up automatically without having to register for a pension yourself.
- Your employer has to pay at least minimum contributions to the scheme on time.
- Your employer has to allow you to opt out of the scheme if you request it. If you leave it within one month of being automatically enrolled, you should get a refund for the money that you’ve already paid into it.
- You’ll get the option to re-join the scheme at least once a year.
- Even if you opt out, you’ll still be automatically enrolled every three years, as long as you’re still eligible for workplace pensions.
Your employer can’t encourage or force you to leave their workplace pension scheme. This includes implying that you’re more likely to get a job if you choose not to join the scheme. They’re also not allowed to dismiss you unfairly or discriminate against you if you decide to stay in the scheme. Employers also can’t shut down a workplace pension scheme without first enrolling their employees into another one.
Can you opt out of the workplace pension?
You have the right to opt out of your employer’s workplace pensions. You can do this by contacting the pension provider (your employer must give you their contact details). Some providers may require you to fill out a pension opt out form.
If you’re looking to save money for retirement but don’t want to join your employer’s workplace pension scheme, there are alternatives you can consider, including joining a private pension scheme.
If you’ve been enrolled in several pension schemes, you may consider consolidating them. This involves transferring pensions.
Pension contribution rates
Pension contribution rates can vary. Generally speaking, this is how much you and your employer pay:
|Time period||Employer’s minimum contribution||Your contribution|
|From April 2019||3%||5%|
Both you and your employer will keep making contributions to your workplace pension when you take paid leave. This is also the case if you’re on maternal or other parental leave, if you’re getting paid during that time.
- What is Marriage Tax Allowance?
- What happens if you don’t leave a will?
- Registering a death
- What happens to property after a divorce?
- Will a prenup protect me if I get a divorce?
- How much does a divorce cost?
- Looking after your credit score while you’re at university
- Guide to credit and debit card protection
- Cashless society and changing savings habits for kids
- Living and working on the UK Minimum Wage
- How to budget if you’re a single parent
- Infographic: Average Equifax Credit Scores across the UK
- How to budget at university
- Guide to sending money overseas
- How to budget for kids going back to school
- How the Budget 2018 will affect your earning, spending and saving
- Infographic: How much does it cost to get married?
- Infographic: Millennials and money - What kind of side hustles are they doing?
- Budgeting for the holiday season - gifts
- Budgeting for a wedding
- How much rent can I afford?
- Pension tools and resources
- Planning for early retirement
- Downsizing your home
- What will my state pension be?
- Budgeting for a baby
- Budgeting for a holiday
- An introduction to investments
- Budgeting for a funeral
- Financial planning for parents
- How transferring pensions works
- Helping elderly parents manage their money
- Budgeting for school holidays
- Looking after your financial documents
- New Year, new start to your finances
- How to avoid overspending on special occasions
- Financial Jargon Buster
- Getting Financial Help – The Best Online Resources
- Explaining the Different Types of Savings Accounts
- Understanding Payment Cards
- Money Saving Strategies – Tips on How to Save
- How to Budget Your Finances