1. What is automatic enrolment into a workplace pension?
Automatic enrolment into workplace pensions is a government initiative set up in October 2012, which requires all employers to enrol their workers into a workplace pension scheme if they are not already in one.
It’s intended to benefit those who may not be saving enough to have the kind of lifestyle they’re likely to want for their retirement, and to provide another source of income on top of the State Pension.
2. How does it work?
Unlike other ways of saving, being in a workplace pension means you’re not the only one putting money in. Employers will contribute to the pot as well, and you’ll get tax relief from the government. This means that some of your money that would have gone to the government as tax, goes into your pension instead.
The criteria for eligible workers is those who:
• are not already in a qualifying workplace pension scheme
• are aged 22 or over
• are under State Pension age
• earn more than a minimum amount a year (£10,000 in 2015-16)
• work or usually work in the UK.
3. When will automatic enrolment into a workplace pension affect me?
Changes in the law came into effect from October 2012 starting with the largest employers (120,000 or more workforce) who enrolled their workers first. Over the next few years, based on their size, all employers will have to automatically enrol all workers in to a workplace pension who meet the criteria above.
Employers will write to their workers nearer the time, telling them the exact date that the changes will be made.
For further details about ‘staging’ dates visit www.thepensionsregulator.gov.uk/staging.
4. Why should I bother with a workplace pension?
People are living longer, and spending longer in retirement than ever before. So thinking about how you’ll fund it is important.
Plus, you won’t be the only one contributing to your workplace pension. Your employer and the government also make contributions (the latter in the form of tax relief), allowing your money to build up more quickly than if you were saving for your retirement on your own.
5. Am I too old to start a pension?
Being in a workplace pension is worth considering, even if you think you’re too old. Unless your retirement is just a few months away, there’s still time to build up some money – especially with the extra contributions from your employer and through tax relief.
6. Am I too young to start a pension?
Being in a workplace pension is especially beneficial if you start when you’re young. Just a small amount saved regularly has plenty of time to grow. And the sooner you start saving, the more you’ll get.
7. How much will I get from my workplace pension when I retire?
Your life may change a lot when you retire. This means your household finances may be very different too.
It’s possible to get an idea of how much you will get from your workplace pension by getting a ‘pension estimate’ (sometimes called a ‘pension projection’). You can get this from your pension scheme provider. They may also have an online calculator that can help you work out the income you may get when you retire.
Have a look at this workplace pension contribution calculator to work out how much you and your employer will each put into your pension pot – https://www.moneyadviceservice.org.uk/en/tools/workplace-pension-contribution-calculator
8. Will I be forced to save into a workplace pension?
No. Workers can opt out if they don’t feel a workplace pension is right for them.
However, to try and encourage people to save for their retirement, employers will automatically enrol eligible workers back into their scheme at regular intervals (around every three years). This is because your circumstances may have changed and the time may then be right for you to start saving.
Your employer will contact you at the time and you can choose to stay in the workplace pension scheme or opt out.
9. What happens to my workplace pension if I move jobs?
Your workplace pension belongs to you, even if you leave your employer in the future. Nowadays lots of people move jobs several times in their working lives, which could mean you have a number of different workplace pensions by the time you retire.
10. Should I open a workplace pension if I’m already paying into a personal pension?
It’s possible to have both a workplace pension and your own personal pension, so you could choose to continue paying into both. Or you might choose to continue with just one of them. It depends on your circumstances, what you can afford and what your personal and workplace pension schemes are offering.
11. I’m on a low income and can’t really afford to pay into a pension
Being in a workplace pension is still worth considering, even if you think you’re too young or on a low income. Just a small amount saved regularly has plenty of time to grow. And the sooner you start saving, the more you’ll get at the end.
Remember that any money you put into a pension scheme is not ‘lost’ income. It’s simply stored away and saved for your retirement, when you’re really likely to value it.
Realistically, we all know that pensions can go up as well as down, but analysis suggests that for over 95 per cent that improvement is greater than the cost of the contribution, even after allowing for inflation. For over 70 per cent, the expected improvement is more than twice what they put in.
To find out more about what automatic enrolment into a workplace pension means for you and the benefits of staying enrolled, visit www.gov.uk/workplacepensions
