Types of workplace and company pension schemes

An occupational scheme (often called a company pension scheme or superannuation scheme) is usually the best way to save for retirement, because your employer adds to your savings.

Pension schemes through your work

If the firm you work for has five or more employees, it must offer some kind of pension scheme that you can join. This could be:

  • An occupational scheme (company pension scheme or superannuation scheme). This is run by your employer who must pay into the scheme on your behalf. You usually have to pay in too. When you leave the employer, all the contributions stop, but you keep the pension you have built up so far. This will generally be a final salary scheme, career average scheme or money purchase scheme.
  • A group personal pension (GPP). This is run by an insurance company or other provider. Usually your employer pays in 3 per cent of your pay on your behalf. You choose how much extra you want to contribute. When you leave your job, your employer’s contributions stop, but the scheme stays with you and you can carry on paying into it. All GPPs are money purchase schemes.
  • A stakeholder pension scheme. This is usually run by an insurance company. Your employer does not have to pay in anything on your behalf. You choose how much you want to contribute. When you leave your job, the scheme stays with you and you can carry on paying into it. A stakeholder pension scheme is always a money purchase scheme.

In future, even small employers will have to enrol most of their employees into a workplace pension scheme under new automatic-enrolment rules. These rules took effect between 2012 and 2016, depending on the size of your employer’s workforce, with larger employers coming on board first.[Continue Reading…]