What’s the best perk at work: A company car? Free coffee? How about money for your future?
Starting from October, the law is changing so millions of people will receive a workplace pension for the first time. If you’re in work, your employer will automatically enrol you into a scheme. You can opt out but think carefully – what’s your plan B going to be?
This is going to affect you if you’re:
- not already in a pension scheme at work*
- aged 22 or over
- under State Pension age
- earn more than £8,105 a year
Here are five reasons why you need to start thinking about a workplace pension:
#1 – You won’t be the only one paying in
There’s a big difference between a workplace pension and other types of savings such as anISA– your employer and the government contribute too.
So your workplace pension will be made up of three parts:
- You’ll pay in a small percentage of your earnings into the scheme
- Your employer will contribute too
- And the Government will give you tax relief – this means money that would have gone to the government as tax will go into your workplace pension instead.
And with three contributions, your pension pot will grow a lot quicker!
TIP: You can get an idea of how much you will get from your workplace pension by getting a pension estimate. Speak to your employer or whoever runs your pension scheme to find out more.
#2 – It’s easy – your employer does the hard work
Let’s be honest, sorting out a pension is rarely at the top of people’s “to do” list. The new law means your employer – and not you – will be responsible for finding a suitable pension scheme and sorting out the paperwork. The law will affect largest companies first and roll out to medium and small companies over the next few years. Your boss will write to you to let you know when the changes will affect your company.
TIP: Find out when automatic enrolment will affect you by speaking to your employer or ask about it at your next job interview.
#3 – It’s your money for your future
One of the most common questions about workplace pensions is: “What happens to my money when I change jobs?” The good news is that your money will stay in your pension and is yours to keep – you don’t have to give it back if you move to a new job and you’ll still be able to access it later in life. You may even be able to transfer it to the scheme your new employer runs. So a workplace pension is a great way to secure your future.
TIP: Think about small ways of saving money now which could be topping up your pension instead. Taking the bus instead of a taxi, skipping a few bought coffees or making a packed lunch instead of buying one are easy and you’ll be rewarded in the long run.
#4 – You could have 20+ years in retirement
It’s a fact – we’re all living longer. The current State Pension is £107.45 per week for a single person. It’s a great foundation but you may want more. If you stay enrolled in a workplace pension, you’ll make regular contributions during your working life. This will be topped up with money from your employer and tax relief from the government.
TIP: Use the State Pension age calculator to work out when you’ll receive your State Pension.
#5 – Live the life you want
Think about all the things you enjoy doing now such as going on holiday, eating out, and socialising with friends and family. Chances are you’ll still want to do those things when you’re older. So, when workplace pensions start in your workplace, think about your future self. Saving over a longer period means your money will have more time to grow.
TIP: Use your future wallet to get an idea about your future money and lifestyle.
Read all about it
For more information about workplace pensions and what they mean for you, visit www.direct.gov.uk/workplacepension