Workplace Pension Law

A workplace pension scheme or an occupational pension, is a scheme that must be provided by employers to employees in accordance with the Pensions Act 2008. The act states that employers must automatically enrol an employee into a pension scheme that the employer themselves must also contribute towards. The employee’s contribution will be taken through a direct deduction of the employees’ wages. Since April 2019, this deduction has been set at 5% of your overall income. The employer will then match this with a statutory minimum of a 3% contribution, therefore a total of 8% contribution to the employees’ pension monthly, with the discretion to increase payments.

The Money Helper site has created a useful tool that can be utilised to help you work out your pension fund. The calculator will help you determine how much you need to be able to retire comfortably and how much you will have according to your contributions. You can access the tool here.

Different types of schemes

There are two types of schemes an employer offers:

• Defined contribution pension
• Defined benefit pension

The pension in which you are enrolled could be selected by yourself or by default. The workplace pension is separate from the state pension. Whether you are enrolled in a workplace pension or not, it has no bearing on your state pension, as your eligibility for the state pension is based on your national insurance contributions.

Opting out

You have the right to opt out of your pension at any time by following your organisations ‘opting out’ process. However, it may be beneficial to use the calculator tool located on the Money Helper website before considering this as it will be helpful to understand the amount you will need to contribute.

It is mandatory for your employer to reenrol you every 3 years, to which you have the discretion to opt out again if you still do not wish to contribute.  If you have already started to contribute towards a workplace pension pot but then changed your mind, you can still leave, and your pension pot will be held for you when you either re-join or could be transferred to a new employer’s pension scheme. This will vary depending on the pension providers terms and conditions.

If you have lost track of your pensions and what you have contributed, you can utilise the gov.uk pension tracker

Accessing your pension

Following the 2015 reform on workplace pensions, employees can withdraw their workplace pension from the age of 55.

Furthermore, when you are setting up your pension you may want to nominate an individual as a beneficiary of your pension for situations where an individual passes before, they have accessed their pension. Most pension schemes allow you to nominate a person who you wish to leave your pension to upon passing and not reaching pension age. This can include a family member, spouse, or even friends. However, every pension scheme has their own terms and conditions that must be followed. You can enquire with the pension scheme directly who will be able to discuss the beneficiary process.

If you suffer from ill health, you may be eligible to withdraw your workplace pension before the age of 55. There will be set criteria that you must meet depending on your pensions’ schemes policies. Generally, you would have to establish the following.

• That you are permanently incapable of carrying out your job role due to your health condition,
• And that you have explored all other avenues including treatments and alternative roles but are still unable to continue to work.

If the above applies, contact your employer and pension provider who will be able to provide you with support throughout this process.

If you have further queries relating to pensions, please contact the government’s free pension service: Pension wise on 0800 138 3944.