Advantages of a workplace pension

For many of us, retirement seems a long way off. But at some point in the future you’ll face the prospect of giving up work and still needing an income. While you may be entitled to an income from the state pension, it will most likely provide you with less than you were earning while you were working. A workplace pension is a simple way to help address the difference in income you receive during your working life and in retirement.

You and your employer can both make regular payments into your plan. Plus, some of your money that would have gone to the government as tax goes into your pension instead. All these contributions go directly into your pension pot to be invested, which can help grow your savings even more.

The value of investments and the income you may get from them can go down as well as up so you may get back less than you invest.

Joining your company’s pension plan puts you in control of your future. You can decide how you’d like your money to be invested or you can leave it to the experts. You can also stop contributing to the plan if your situation changes. Then, when you’re ready to retire, you can decide what to do with the money you’ve built up. Any money you invest in your pension will normally remain in your plan until you reach the minimum retirement age (currently 55).

A pension plan organised by an employer to help its employees save for later life. The employer pays in and the employee may or may not need to pay in too. They are also known as occupational or company pension plans. There are two different types of occupational pension plans: money purchase and final salary plans.

A money purchase plan is designed to build a capital sum to provide retirement benefits. Some money purchase plans are referred to as personal pensions or group personal pensions, these may be funded by an individual and also by an employer as a workplace pension. If setting up yourself, you can decide your provider and the amount of contributions payable independent of any employer. If the personal pension is a workplace pension your employer will choose the provider, set up the plan and may have conditions about the levels of contributions that are payable.

A regular lifelong income payable by the UK government that you may qualify for once you reach State Pension age, currently age 65. In the UK, the amount you get depends on your National Insurance contribution record. The State Pension age for men and women is increasing and will reach 66 by October 2020. It’s due to rise further to 67 between 2026-28 and to 68 between 2044-46.

The State Pension age has changed over the last two decades and is reviewed at least once every five years, so could change in the future.