What is a workplace pension?

You should have three main pension types on your radar to better understand your retirement savings:

This article will guide you through workplace pensions and where they fit into your retirement planning.

What is a workplace pension?

A workplace pension is a pension your employer sets up for you when you begin working at a company. Your employer is required by law to enrol you into a pension scheme if you are currently employed.

The government reviewed the state of UK pensions and introduced automatic enrollment in October 2012 after concluding that people needed to put more money away for retirement. Now every employee is automatically enrolled in a workplace pension by their employer and must opt-out if they don’t want to contribute each month.

The average person in the UK has 11 jobs in their lifetime; you may have multiple pension pots from different employers. If you are looking to find old pensions or simply combine your old workplace pensions into one personal pension, we can help you.

Am I automatically enrolled in a workplace pension?

Every employer in the UK is required by law to provide their employees with a workplace pension scheme.

Your employer must enrol you in a workplace pension scheme if the three points below all apply:

  • Are aged between 22 and state pension age
  • Earn more than £10,000 per year
  • Usually, work in the UK

Types of employer pension schemes

There are two types of workplace pensions to know about:

Defined contribution pension

  • You will be making monthly contributions to a pension pot (your employer can contribute too).
  • Your contributions are automatically deducted from your salary and paid into a pension account; the amount you’ll get in retirement depends on how much money has been invested for you.

A defined contribution pension is now the most common workplace pension used by private companies.

Defined benefit pension

  • Employers guarantee this retirement income based on an employee’s salary and time spent working at the organisation.
  • Both employer and employee contribute to this kind of pension.
  • You may have a defined benefit pension if you work or have worked at a large company or public sector.

These types of workplace pensions are rare. Most defined benefit schemes have been phased out or closed to new entrants.

What is the minimum contribution I can make to my workplace pension each month?

Since April 2019, the minimum contributions for the workplace pension have increased.

If you choose to opt into your workplace pension, you will contribute a minimum of 5% of your salary (1% of that will be returned to you in government tax relief) and your employer will pay at least 3% (some employers are more generous).

Can I combine my previous workplace pensions?

You can transfer this to another pension provider if you have a defined contribution pension (the most common workplace pension) from a previous employer. There are some benefits to having your previous workplace pensions combined into one place.

At CIRCA5000 offers a free service where we can track down your old workplace pensions for free. You then can open a personal pension (SIPP) with CIRCA5000 and combine those pensions into one new pension pot.

Combining old workplace pensions

Can I move my current workplace pension to a CIRCA5000 personal pension?

The easiest way to combine pension pots is to find old workplace pensions and move them into a new pension. However, if you would also like to transfer your current workplace pension to CIRCA5000, it depends on your current workplace pension scheme provider. Some pension scheme providers allow you to re-direct your pension payments to a new pension while your employer continues to pay into the scheme they set up for you.

Speak to our customer service team, who can help you with any questions about moving current workplace pensions.

Can I opt out of a workplace pension scheme?

The short answer is yes. But that means losing out on free employer and government contributions, which can significantly increase your retirement savings. If you continue to pay into your workplace pension, your employer and government contributions could mean you have a larger pension pot when you retire instead of trying to save on your own.

Will I have a workplace pension if I am self-employed?

Unlike those working for an employer, If you are self-employed, it’s up to you to start a personal pension to save for retirement. As you pay national insurance, like those employed, the government will provide you with a state pension. But a state pension alone is usually not enough to give you a moderate or comfortable retirement.

How can I set up a pension if I am self-employed?

There is more to consider when you are a freelancer with no employer to choose a pension scheme on your behalf. You might also benefit from flexible contributions to your pension if your income fluctuates from month to month.

A personal pension can help you gradually save time for your retirement and set you up for the future. However, you also have complete control over where you invest your money for retirement.

CIRCA5000 helps you save for the future while doing good. In our app, you can set up a personal pension and adjust contributions.

What happens to my workplace pension when I leave my job?

When you leave your current job, the combined savings of you, your employer and the government while you were in that job will stay with the pension scheme that your employer set up. At this point, you can:

  • Leave it where it is
  • Transfer it to another pension provider (like us)

How is my workplace pension invested?

When your employer enrols you into a workplace pension scheme, they choose your pension provider. Some pension providers allow you to select the funds your pension is invested in, while others don’t.

UK pension funds have an estimated £128 billion invested in fossil fuels — equivalent to almost £2,000 for each person in the UK. There is a high likelihood that one or more of your old workplace pensions might be invested in sectors that are harming the environment.

Our mission at CIRCA5000 is to make it easy for you to invest your money in companies that are actively doing good. Our funds only include companies making a positive impact while aiming to provide you with competitive financial returns. So you can be confident that your pension is helping to address some of the world’s biggest challenges.

Is a workplace pension a private pension?

The short answer is no. Your employer sets up a workplace pension, and a private pension (also known as a SIPP, personal pension) is set up by you.

However, you can combine your old workplace pensions into a private pension, and there are lots of benefits to having your pension with one provider.

CIRCA5000 personal pension

With CIRCA5000, you can open a personal pension that’s good for the planet. Take control of your pension and invest in companies that are actively working towards a better future for everyone, whilst aiming to make big profits. You can choose to open a personal pension and contribute monthly to it. We can also track down your old workplace pensions for you and combine them into one pot that you can easily manage in our app.

When you invest, your capital is at risk. You should consider whether opening a CIRCA5000 pension or transferring your old pension is right for you. Please note that tax rules and reliefs may change depending on your circumstances. CIRCA5000 does not provide any financial or tax advice, and you are responsible for your own tax reliefs/payments. This article does not represent financial advice.

Important information - Investments can go down in value as well as up, so you can get back less than you invest. The information on this page isn't investment advice. If you're not sure if an investment is right for you, please seek advice. Tax rules can change and depend on individual circumstances.