Workplace pensions also known as Occupational Pensions are a way of saving for your retirement. Each month a certain amount will be deducted from your pay and saved until you retire.  Pensions are arranged by employers rather than the state. The employer and usually the employees, contribute to the fund.

The two main types of occupational pension are:

• Defined benefit schemes (such as final salary schemes) where the income on retirement is effectively guaranteed.
• Defined contribution (or money purchase) schemes where the income on retirement depends on factors such as stock market performance, the amount of money contributed and the level of fees payable.

There are also certain ‘hybrid’ arrangements, for example ‘cash balance’ schemes, where employers offer some limited guarantees over levels of eventual income.

The legal position

A substantial and ever expanding body of legislation governs employers’ pension arrangements.

Pension contributions and benefits are influenced by HM Revenue & Customs limits. Further details and the latest figures are available from the HMRC (see the Useful contacts section below).

Auto-enrolment

All employers automatically enrol eligible workers into a qualifying workplace pension scheme (unless the worker chooses to opt out) to which the employer must contribute.

Under auto-enrolment, jobholders may be enrolled into an existing occupational pension scheme if it meets or exceeds certain minimum requirements.

Contribution levels are a  minimum contribution of 8% (with at least 3% from the employer).

Useful Links

Gov.uk – Workplace Pensions

Department of Work and Pensions

Pensionwise