Workplace pensions may also be known as company pensions and occupational pension schemes.
The employee doesn’t have to do anything to enrol — the employer makes all the arrangements. Every payday, a percentage of the employee’s pay is deducted automatically from their salary or wages and invested in the scheme. The employer also contributes to the scheme on the employee’s behalf as does the government in the form of tax relief.
Workplace pensions are pension schemes that are set up by employers to provide their employees with retirement benefits. The different types of workplace pensions are:
In a ‘defined contribution scheme’, the employee’s retirement income is based on the contributions made, whereas in a defined benefit scheme, the employee’s pension income is based on his or her salary and length of service with the employer. Most occupational pension schemes are defined contribution schemes.
What happens if the employer goes out of business?
Most defined contribution schemes are managed by insurance companies not the employer, so employees’ pension pots should not be affected. If the scheme is a trust-based scheme, employees will still get their pensions, although not as much because the scheme’s running costs will be paid out of members’ pension pots rather than by the employer.
Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension and pay into it. This is called 'automatic enrolment'.
Any employer (with at least one member of staff) must automatically enrol every employee between the age of 22 and State Pension age and earning more than £10,000 a year into a company-managed occupational pension scheme.
Whether you're a builder, a newsagent, have a personal care assistant or a nanny, you are an employer from the day your first member of staff started working for you and you have legal duties for automatic enrolment which begin on the day your first member of staff starts work
The Pensions Regulator is responsible for ensuring that all employers comply with workplace pension law. It's important that you understand what you'll need to do and prepare early.
The minimum contribution for employers is 2% of the employee’s earnings, rising to 3% on 6 April 2019. Employees are obliged to contribute at least 3% of their earnings before tax, rising to 5% on 6 April 2019.