Since the Pensions Act 2008, automatic enrollment has come into force. This means that every company in the UK, regardless of size, has to offer a company pension if they have employees who meet the following criteria:
- At least 22 years of age, and under the State Pension age
- Earning a minimum of £10,000 per year
- Working in the UK
There is also a minimum contribution that your company must ensure is in place:
- Until 5 April 2018 – Employer must contribute at least 1%, total contribution must be at least 2%
- 6 April 2018 – 5 April 2019 – Employer must contribute at least 2%, total contribution must be at least 5%
- 6 April 2019 onwards – Employer must contribute at least 3%, total contribution must be at least 8%
Do you have to be a member of a workplace pension scheme?
You’re allowed to opt out of your workplace scheme if you don’t want to contribute to the pension, but you will miss out on the tax relief awarded on these contributions and those made via the employer on your behalf. A workplace pension can be an effective way of building up funds for your retirement but the decision is yours – you will be automatically enrolled when you join a company but you’re entitled to opt out within a specific time period if you wish.
What happens if you’ve got multiple workplace pensions?
This is perfectly normal – studies show on average almost 4 in every 10 adults will have multiple workplace pension schemes by the time it comes to retire due to moving jobs. It’s possible to consolidate these different pots into one, and in many situations it makes sense to do so. We would recommend seeking advice from an Independent Financial Adviser (IFA) if this is something that you are considering.
When can you claim your pension?
The time that you can claim your pension varies depending on the specific rules of your provider, but it can be up to 10 years before you would be able to claim state pension – the minimum age is usually 55. This is set to increase to 57 by 2020 and will remain 10 years until the state pension age going forward.
When you decide to claim it, you’re usually able to take 25% of your pension pot as a tax-free lump sum, with a number of options available on how to use the remaining funds.
What can you do with the fund once you reach retirement?
The best thing you can do is speak to one of our recommended IFAs for advice on how to make the most of your existing workplace pension funds and what steps to take to ensure you get the best deal.
We strongly advise you to speak to one of our partner IFAs at least five years before you are due to retire – this way you’ll not only have a clear idea on the overall value of your pension pot, but this will also allow you to increase contributions and make any top ups to state pension should they be required to ensure that you are maximising the income you receive in retirement.