What is a ‘workplace pension’?

A ‘workplace pension’ is a pension plan arranged by an employer which is used to save for an employee’s retirement.

Workplace pensions can sometimes be known as ‘occupational’, ‘works’, ‘company’ or ‘work-based’ pensions.

For employees of small to medium companies, a workplace pension can also take the shape of a Group Personal Pension Plan.

How do they work?

On a regular basis (payday), an agreed percentage of an employees salary is deducted automatically from their gross pay and is paid into a pension scheme on their behalf.  Normally, the employer will also make a contribution to the pension plan and the government will contribute by way of tax relief.

Like most pensions; workplace pensions, whatever form they may take, are designed to save over the long term for an individual’s retirement; providing them with an income for life throughout their retirement.

Usually, an income from a workplace pension can be taken from age 55 and some of the pension can be taken as a tax-free lump sum.

What is ‘Auto enrolment’

A new law means that every employer must automatically enrol certain workers into a workplace pension.

This is called ‘automatic enrolment’.

If an employer already provides a workplace pension scheme, the employee may not see any change. The pension arrangement will usually carry on as normal.

Good News for employees – if at the moment an employer doesn’t make a contribution to the pension; they will soon have to by law.

For more help and advice please do not hesitate to contact Paul Hoskin at Hoskin Financial Planning