Understand your enrolment into a company pension
In 2012, it became compulsory for employers to give their employees access to a pension. Since then, millions of people have been automatically enrolled into a company scheme, but what does that mean for you?
Invest in your future without having to apply for a pension yourself
Your employer will also be paying into your pension
When you pay money into your pension, it will benefit from tax relief from the government.*
If you move to a new company your pension plan will stay with you, ready to use when you reach retirement.
* Tax benefits are subject to change and depend on your individual circumstances. The information on tax relief relates to Group Personal Pension schemes including the Aviva Company Pension. Master trust or other alternative pension arrangements will have different tax rules. Your employer will let you know what type of pension they use for Auto Enrolment.
When will you be enrolled?
The process started in October 2012, and by now all companies should have automatically enrolled their eligible employees into a workplace pension scheme (unless you opted out).
Whether you’ve been automatically enrolled or not, your employer should have written to you to explain the details.
Are you eligible?
Your employer will have to enrol you in a pension scheme if you:
- Work in the UK
- Are aged between 22 and State Pension age
- Earn more than £10,000 a year
- Aren’t already in an appropriate pension scheme
Even if you don’t meet these criteria and won’t be automatically enrolled, you can still join your employer’s pension scheme. All you need to do is let them know you want to join. Your employer will tell you what pension they will offer you, and whether they will contribute.
Benefits of auto-enrolment
Investing for your future
Auto-enrolment makes it easier for you to invest for your retirement. Rather than having to research and join a pension scheme yourself, you’ll be signed up to your company’s scheme automatically.
You should still find out all your can about the scheme, to help you decide whether it's the best option for you. There are charges for investing in a pension. There will be a default investment but you could choose where to invest your money.
Once you’re enrolled, your employer will contribute to your pension too. The amount you and your employer pay into your plan is worked out as a percentage of your pre-tax income. Your employer will tell you the actual contribution levels they offer, and how much you would have to contribute. Based on qualifying earnings, the minimum contribution will be 8% and your employer will need to pay at least 3% of the contribution. The table below gives an example of how this would work.
|Your minimum contribution||Employer minimum contribution|
When you make a payment into your pension, you’ll also get some tax relief. Tax relief is given by HMRC on contributions that are paid into your pension by you during a tax year.
Your pension scheme or provider will tell you how tax relief works for you. In most cases, you have an annual allowance of £40,000 of benefits you can build up in pensions, including your employer’s contributions.
Tax relief is subject to change and will depend on your individual circumstances. Tax rules and allowances may differ in Scotland and Wales.
How much could you receive at retirement?
Once you're a member of a pension plan, you'll receive annual statements which give an indication of the kind of retirement income you could get for the amount of money you're paying in.
This will be based on a few assumptions which will be explained in the annual statement, so you'll need to read through it carefully.
Remember, the value of your pension can go down as well as up and you may get back less than paid in.
Can you opt-out of the pension scheme?
Your employer has to enrol all their eligible employees, but you can opt-out if you want to.
Think carefully, though. If you opt-out, you’ll be missing out on the contributions your employer makes into your pension plan.
Remember, you can only opt-out after you’ve been enrolled in the first place, so look out for the details of how to do it after you’ve been enrolled.
You can opt back in to your company’s pension scheme if you have opted-out at any time. Just submit a request in writing (which can include an email) that’s signed or – if by email – confirms you have personally submitted it. Your employer may reject your request unless you meet certain conditions.
Your employer will also automatically enrol you back in once every three years if you’re eligible, even if you’ve opted-out.
Make sure you fully understand the implications of opting out for your financial circumstances in retirement and look into alternative options so you have enough money to support the type of retirement you have in mind.
If you’ve been enrolled into a pension with us by your employer, find out how it works and what’s in it for you.