What is a Workplace Pension Scheme?

A workplace pension scheme helps your employees to save for their retirement. You, their employer, arrange the scheme for them. You might know it by other names: works pension, company pension, occupational pension, or work-based pension. They all mean the same thing.

Workplace Pension Law

The Pensions Act 2008 stipulates that every employer in the United Kingdom must enrol all eligible staff into their workplace pension scheme.

Workplace Pension Contributions

So how does it work? Well, on payday, both the employer and the employee contribute to the employee's workplace pension.

How Much Should an Employer Contribute to Workplace Pensions?

The employer, the employee, and the Government all contribute a minimum amount. The Government does this by giving tax relief on the payments. As of the start of the tax year 6 April 2018, employees must pay 3% of their earnings into their pension if they're on the workplace pension scheme. Their employer pays 2%. Both parties can contribute more if they choose. In the following tax year, starting on 6 April 2019, the minimum will go up for both staff and boss. Employees will contribute 5%, and employers 3%. If your staff earn these amounts or less, you don't have to contribute:

• £503 per month.
• £464 per 4 weeks.
• £116 per week.

Who Can Be On Your Workplace Pension Scheme?

The Government introduced workplace pension auto-enrolment to give as many people as possible the option to save some of their earnings for when they retire. As a boss, you now have to enrol all eligible staff in your company's workplace pension scheme. An employee is eligible if:

• They're at least 22 years old.
• They earn at least £10,000 per year.
• They usually work in the UK.
• They're not already in a suitable workplace pension plan.

If someone meets these criteria but is on maternity, paternity, or adoption leave, you must auto-enrol them. If your employee earns less than £10,000 but more than £6,032 per year (for the tax year 2018-19) then you don't need to auto-enrol them, but they can ask to join your scheme. And you can't refuse them.

As an Employer, You Must Not Do Any of the Following:

• Encourage or try to force anyone to opt out of the scheme.
• Unfairly dismiss or discriminate against anyone for staying in the workplace pension scheme.
• Imply or suggest that someone is more likely to pass an interview if they later choose to opt out of the workplace pension scheme.
• Close one workplace pension scheme without making sure that you auto-enrol all members into another one.

You Must Tell Your Staff the Following:

• The date you added them to the scheme.
• The company that runs the scheme.
• The type of scheme.
• How much you and they will each contribute to their pension.
• What they need to do if they want to opt out.

Employers can delay enrolling someone on the scheme automatically for up to three months. However, if an employee asks to join in that time, you must let them, if they're eligible. In addition, you must inform them that you're delaying their enrolment.

What Happens to Your Pension if You Leave Your Job?

One of the most common questions an employee has about their workplace pension is, "What happens to my pension if I leave my job?" When an employee leaves their role in your organisation, their pension still belongs to them. They can carry on investing in it, or leave the payments until their retirement age. If they take another job, they will likely join another workplace pension scheme. In doing this, they have a couple of options:

• Continue paying into their old pension.
• Combine their old and new pensions.

The old pension might have come with better, or worse, benefits than their new pension. An employee should always ask their provider about the details of their pension plan.

Talk to an Expert

If you want to learn about other types of pensions, we also have great guides on:

• Private pension plans.
• The State Pension.

For more information about the workplace pension for employers and employees, contact Croner's expert reward team on 0808 145 3379.