What is a Workplace Pension?
Workplace Pensions play a crucial role in helping you plan for your future, but what exactly are Workplace Pensions, and how do they work?
What is it?
A Workplace Pension is a retirement savings plan that is arranged by your employer on your behalf. It’s a way to save money consistently so that you have a source of income in addition to the state pension. See how it typically works below:
- Employee & Employer Contributions: You and your employer contribute a percentage of your earnings into the pension scheme each month.
- Investment: The money you and your employer contribute is then invested in various assets (Pension Plans) with the aim of growing your savings over time with the help of Compound Interest.
- Retirement Income: When you reach Retirement Age, you can then access your pensions savings (How to access your Pension Savings) to ensure you can live a comfortable life when you have decided to stop working.
Who is Entitled to a Workplace Pension?
In order to be enrolled in your workplace pension you must be what’s known as an ‘Eligible Employee’. To be eligible you must therefore be:
- Not already in an active workplace pension
- Aged 22 or over
- Under State Pension age
- Earning more than £10,000 a year
- Working in the UK
In the past it was up to employees to choose whether or not they wanted to be enrolled in a Workplace Pension, however since October 2012 employers have been gradually required to automatically enrol their eligible employees. It is therefore highly likely that if you are an eligible employee, and have had multiple jobs, you will have several workplace pensions already (How to Find Old Workplace Pensions)!
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