Some workplace pensions are called ‘occupational’, ‘works’, ‘company’ or ‘work-based’ pensions.
How they work
A percentage of your pay is put into the pension scheme automatically every payday.
In most cases, your employer also adds money into the pension scheme for you, and you get tax relief from the government.
The money is used to pay you an income for the rest of your life when you start getting the pension.
You can usually take some of your workplace pension as a tax-free lump sum when you retire.
If the amount of money you’ve saved is quite small, you may be able to take it all as a lump sum. 25% is tax free but you’ll have to pay Income Tax on the rest.
You can’t usually take the money out before you’re 55 at the earliest – unless you’re seriously ill.
Workplace pensions and the State Pension
Today the maximum basic State Pension you can get is £113.10 per week for a single person.
The money you get from a workplace or other pension could make it much easier for you financially when you’re retired.
A new law means that every employer must automatically enrol workers into a workplace pension scheme if they:
- are aged between 22 and State Pension age
- earn more than £10,000 a year
- work in the UK
This is called ‘automatic enrolment’.
Check if the new law applies to you and when you may beenrolled into your employer’s scheme.
You may not see any changes if you’re already in a workplace pension scheme. Your workplace pension scheme will usually carry on as normal.
But if your employer doesn’t make a contribution to your pension now, they will have to by law when they ‘automatically enrol’ every worker.