Workplace Pensions

What is it?

A workplace pension is a scheme made for workers to save towards their retirement. This is done through deductions to employees’ wages which is then contributed into their pension pot. It is automatically deducted from employees wage every time they get paid. On majority of occasions, employers usually add a small amount into the employee pension.

Previously, it was up to employees to decide whether they enrolled in their employer’s pension scheme. However, workplace regulations came into force using automatic enrolment in 2012, making it compulsory for employers to set workers up in a workplace pension, unless they manually choose to opt out.

 

Who is entitled?

You will automatically be enrolled into the workplace pension if you are;

• Aged 22 or over.
• Under state pension age. (Usually 68)
• Earning more than £10,000 a year.
• Working in the UK.
• Not already enrolled in a work place pension.

An employee can choose whether to opt out of a workplace pension scheme. However, it is a good idea to opt in if they can afford to do so.

 

How much is in place?

How much goes into your pension pot is dependent on how much you would like to be taken out of your wages each time you get paid, if you choose to put more money into your pension you must make sure you can afford to do so. Pension is usually calculated by the age you start your pension and divide that by 2. That number is then taken as a percentage and taken off your pre-tax salary.

 

 

Duties as an employer

As an employer, you must make sure all your eligible employees are set up into the scheme. You should also try not to encourage employees from opting out, neither dishearten employees for choosing to opt in.

 

Is it worth it?

 Deciding whether a workplace pension is worth it is dependent on the employee. However, for many people it is a good idea, even if you have other financial commitments because the more/ earlier you save towards your pension pot, the more you’ll have when you retire. Additionally, you can benefit from tax relief as this is the easiest form of legal tax relief from the government. Your employer will contribute towards your pension pot, making more money for you in the end. Essentially, the earlier you start contributing, the easier life gets.

 

Beware of Pension Scams

It is important to beware of pension scams. Scammers will try to persuade pension savers, targeting any and every one with a pension to transfer their entire pension or send a huge sum making false promises or offers that are simply too good to be true. An example is telling you to transfer your pension savings into investment/s (usually overseas), offering huge returns and “doubling” your pension.

 

Here are 7 signs you should look out for when identifying pension scams.

1. You are receiving unsolicited calls, texts and emails.
2. You are being offered early access to your pension before the legal age of 55.
3. You are being told to invest in a single asset or assets.
4. You are told to act fast to not miss out on the best opportunities.
5. You are asked to withdraw money first.
6. The number calling you does not allow you to call back.
7. They give you another number/s to call.

 

For more information on this blog or to speak to an expert, contact us below!