Workplace Pension Schemes and Automatic Enrolment
Some people put off thinking about their retirement including what income they may eventually have, but the sooner they look at the options available to them the better. Comfort in your advancing years is helped by having a decent standard of living. The government state pension should cover the basic needs of most people, but saving some extra money is always beneficial.
By 2017 employers are required to enrol eligible employees into their workplace pension scheme. You can be automatically enrolled if you are:
- Aged 22 or over
- Are not already enrolled in a workplace pension
- Have not yet reached pensionable age
- Earn over £10,000 per year
- Work within the UK
It is generally a good idea to join the scheme, which your employer has to contribute to, although you can choose to opt out. If you do join, any contributions you make will receive tax relief, and other advantages may include support for your partner in the event of your death.
Occupational Workplace Pension Schemes
There are two types of workplace pension scheme, being occupational pensions and group personal or stakeholder pensions. Occupational pension schemes include final salary schemes and money purchase schemes.
A final salary scheme is linked to your pay, and the pension you will receive depends on your wage at retirement and the number of years in the scheme. You and your employer will both pay into the scheme, although they are offered less frequently these days.
Money purchase schemes, are also known as contribution schemes in which your money is invested, and an amount is paid to you when you retire. Both yourself and your employer will normally contribute, and the amount you are ultimately paid is reliant on how the investments, chosen by your employer, have performed. If your employer does not intend to make any contributions into this scheme, and you are not eligible for automatic enrolment, you may want to look into personal pension schemes elsewhere. As well as the actual pension, these occupational pension schemes often offer benefits like life insurance, pensions for your spouse or dependants on your death, and a pension on early health related retirement.
Group [Workplace] Personal Pensions and Stakeholder Pensions
Where you are not eligible for automatic enrolment, there are group personal and stakeholder pensions. These are similar to private pensions, with the provider being chosen by your employer and you having contact with that provider. The pension fund is paid into directly from your wages and grows as a result of the investments. With this type of pension you will have less control over how the money is invested. Again if your employer will not be paying in you may wish to compare this option with other pensions on the market.
Whichever pension scheme you choose to join, the earlier you join the better, allowing you the maximum benefit possible. In some cases once you have decided to opt out, you may not be able to then join at a later date.
Professional Advice about Workplace Pension Schemes
With these workplace pension schemes, you can save however much you desire, even if you have other existing pension schemes, although there is a limit to how much tax relief you can get on your contributions. Check that you can afford the payments you would like to make before committing. Getting professional advice on this and things like changing your job and how it may affect your pension plan is a must.
There have been a noticeable increase in pension scams since early 2015, particularly relating to new rules about withdrawing some or all of your pension pot. People offering extremely convincing fake investments should be checked out thoroughly before any arrangement is entered into. Seek reliable and trustworthy advice from financial experts like John S Culwick, about any aspect of your pension and how to proceed, to protect your money.
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