Life expectancy in the UK is increasing however many of us are saving less into pensions. Last October, the government introduced workplace pensions and most individuals will be automatically enrolled. Am I automatically enrolled?
If you were enrolled you, you’re employer and the government will pay into it. Having a workplace pension makes saving easier and will allow you to keep living the same standard of life when you retire.
If you opted out of the workplace pension do you have a plan b? It’s never too early to start thinking about your retirement.
Here’s how the workplace pension works;
- Every payday a percentage of your pay is automatically put into the pension scheme for you.
- There are 2 main types of workplaces pensions;
1. Defined contribution pension schemes
Your employer will chose which pension provider to invest your money into. When you retire, the amount you receive will depend on:
- How much has been paid in
- How long you’ve been paying in
- How well the investment has done
Nearer the retirement age, the pension provider generally moves your money into lower-risk investments; if this is not done automatically you can ask your pension provider for more details.
2. Defined benefit pension schemes
These pensions are also known as ‘final salary’ or ‘salary-related’ pensions. These pensions will give you a certain amount each year when you retire, the amount doesn’t depend on investments.
How much you get will depend on how long you have worked for your employer and your salary, the pension scheme administrator can give you more information.
- You pay a percentage of your earnings into the scheme, your employer will also contribute and the government will give you tax relief. Saving couldn’t be easier!
So, if you have opted out of the workplace pension scheme you may want to think about re-joining.
Starting your pension early will give your money time to grow, ask your employer about your workplace pension scheme today.