The law on workplace pensions has changed. Every employer must now provide a workplace pension by April 2019, and employees will be automatically enrolled in the pension scheme that their employer provides.
If you are aged over 22, earn more than £10,000 and work in the UK, you should be automatically enrolled in the pension scheme your employer provides.
The changes have been implemented over time to allow employers to prepare. If your employer doesn’t offer a pension at the moment, they will be required to do so by April 2019 at the latest.
How does it work?
A percentage of your pay will be put into the pension scheme every month, alongside a contribution from your employer and tax relief from the government. This helps you to build up a pension pot for the future.
Some schemes will let you increase your contributions each month, and this may mean that your employer adds more too. The more you pay into the scheme, the more money will be saved for your retirement.
You should be given information about your scheme when you are enrolled, and you have the choice to opt-out if you don't want to contribute.
How can I access the money?
When you can access the money will depend on the scheme’s rules. For most it’s aged 55 at the earliest.
If you want to access the money before you are eligible, the scheme may apply fees or charges.
What you can do with the money upon retirement depends on the individual scheme - you can usually take up to 25% as a tax-free lump sum, and you could buy an annuity.
What if I change jobs?
If you have moved jobs and are worried that your pension money may be left behind, you may have the option to transfer the money to your new employer’s scheme. You may need to seek independent advice before you do this as this won’t be possible for all schemes.
You can get independent advice from The Pensions Advisory Service. If you want to trace former pensions, you can do that too. Read our guide on tracing old pensions.
Does this replace the State Pension?
No, regardless of what workplace or private pensions you have, there will still be a State Pension.
However, the reason the government has created automatic enrolment is to encourage people to save additional money for retirement, as the State Pension is still a fairly low amount to live on for most people if they don’t have any additional income at all.