Many employees are now a member of a workplace pension – like The People’s Pension – that meets the government’s auto-enrolment regulations.
What is a pension?
A pension is a tax-efficient way of long-term saving. The idea is to put some money aside now, to live off in later life, when you want to start working less or retire completely.
But there’s lots of different types of pension…
The People’s Pension is a workplace pension scheme. For most people this is basically a pot of money – employees pay in a small percentage of their wages and the employer adds some more. The employee gets tax relief on the money they save into their pension pot too. Then, with pensions like The People’s Pension, the pot of money gets invested to grow over time. Normally available anytime from someone’s 55th birthday (the government proposes to increase this to age 57 from 2028).
Most of our members will also get a State Pension.
If you pay National Insurance contributions over the years, you’ll be able to claim weekly payments from the government at some point in your 60s. (The age you can claim your State Pension is gradually increasing, depending on when you were born.)
If you get the full amount, it’s currently £9,339 a year – which is unlikely to be enough to retire on, but it’s a good start.
You might also choose to have a personal pension.
Personal pensions are often similar to workplace pensions, but usually available directly to individuals rather than through the workplace. Like a stakeholder pension for instance, which allows flexible payments. Ideal if you’re self-employed or out of paid work.
Many employers previously offered stakeholder pensions. Some may have adjusted their pension schemes to meet the auto-enrolment regulations, while many employers have swapped to workplace solutions like The People’s Pension.
Defined contribution pension
The People’s Pension is also classed as a ‘defined contribution’ pension (as opposed to a ‘defined benefit’ pension).
It’s the type of pension where you and/or your employer add money into your pension pot. Your money is invested over time – so how much you end up with depends on how much you save, charges, and you how your investments perform.
Defined benefit pension
A defined benefit is a type of pension that employers offered regularly not so long ago – giving you a guaranteed income every year from your retirement.
How much you get is based on your salary and the number years you worked there. So it’s sometimes called a final salary scheme (FSS), or career average revalued earnings (CARE).
The good news is we’re living longer – the bad news is most employers can’t afford this type of pension anymore. If you’ve ever had one, make sure you keep track of it (and don’t transfer it to a defined contribution pension scheme without seeing if it’s really worth your while).
If you’ve got a workplace pension, you’ll probably see ‘ER pension’ on your payslip. That’s the money that your employer is contribution to your pension pot.
Similarly, ‘EE pension’ on your payslip is the money that you’re contributing to your pension pot from your wages.
Workplace pension law
If you employ at least one person, employers have a legal duty to offer a pension scheme that can be used for auto-enrolment.
Workplace pension rules
You have to put certain employees into that pension scheme automatically. And you’ll need to pay money into their pension pots. You have to let your other employees know they can join too.
The People’s Pension is a complete support solution – which can help you get on with running your business.
Benefits of a workplace pension for employees
We’re all living longer, and those extra years won’t pay for themselves.
Find out ‘why I need a workplace pension’ in under 2 minutes
- Your workplace pension gives you your own pension that belongs to you – even if you leave your job in the future, it’s yours to keep.
- Each pay period when you pay into it, your employer does too and the government lets you hold on to some of your tax to help you build a bigger pot. That’s free ‘extra’ money, meaning more saved towards a more comfortable retirement.
- Your workplace pension pot is completely separate from the State Pension, and a good way to top up your retirement income.
- The return on your pension savings is likely to be better than from any savings in your bank account. So it’s wise to start saving now to give your money a better chance to grow!
Read more in Your member information.
Your pension savings
If you’ve been auto-enrolled in our workplace pension scheme, you don’t need to do anything to get your pension pot started as it starts automatically.
But if you want to get involved in your pension, you can.
As a member you have your own pension pot and you and/or your employer will contribute to it regularly. Your own pension pot means it’s easy to keep track of how your pension is doing
Remember… the money you put in to your pension pot is topped up by your employer and the government – it includes extra ‘free’ money and is a great way to add to your retirement savings!
If you stop your contributions or reduce them below the statutory minimum, your employer may also reduce their contributions or stop paying in too. So don’t lose out.
Check how much to save for retirement
You can use our calculators to check how long your pension savings might need to last for, and how much you might need to live on – to help you work out how much you need to save.
Choosing not to join a workplace pension
Employees – if you don’t want to be a member of a workplace pension scheme, like The People’s Pension, you don’t have to be.
If you’re auto-enrolled, you can choose to opt out. You can re-join when it suits you, as long as you’re eligible.
Read more in Your member information.
Employers – for any employees who had previously opted out, you’re obliged to enrol them back in to a pension every three years. This is called re-enrolment. They can opt out again if they still don’t think it’s for them.