Company or Occupational Pensions Offered by Employers
If your employer manages a pension scheme you will usually be offered this when you accept a job with them. It is not compulsory to join an employer pension scheme, but if you are lucky enough to be offered one through your employer it can be a very good way to top up your state pension. Not only can you benefit from employer contributions, but some employers also offer:
- life insurance paying a lump sum and/or pension to your dependants if you die while working for that employer
- a pension if you have to retire early because of ill health
- a pension for your spouse and other dependants when you die
Your employer does all the paperwork on your behalf and arranges for your contributions to be automatically deducted from your pay before you receive it. Some employers also offer a 'non-contributory' scheme where they pay into the pension on your behalf and you don't have to pay anything.
| Employer Pensions |
Description |
| Final Salary Pension |
Also known as Defined Benefits, Salary Related or Superannuation schemes. Guarantees a fixed level of income based on your salary and number of years in this job.
Accrual rates depend on length of service, i.e. you may be offered 1/60th of your final salary for every year you're a member of the scheme. If you worked for 40 years at this accrual rate you would get 2/3 of your salary as your pension. This is the maximum you can accrue, most schemes offer accrual rates of 1/80th or 1/120th of your final salary. Mainly offered by Public Sector and Local Government employers.
A very good scheme to have as your pension amount is guaranteed, not being dependent on investment returns; but, many of these schemes are now being closed or frozen due to the long term costs to employers. |
| Occupational Pension |
Also known as Defined Contribution or Money Purchase schemes which build up a pension fund using your contributions, your employer's contributions, investment returns and tax relief. Employees (and usually the employer too) pay into a retirement fund which is invested, for example, in the stock market by the employer, through a Trust or Small Self Administered Scheme (SSAS).
On retirement the employee has a retirement fund to take a tax free cash lump sum and/or buy an annuity (a financial product providing an income for the rest of that person's life). The size of the employees' retirement fund depends on how well the funds' investments have performed and is not guaranteed. |
| Group Personal or Stakeholder Pension |
These are also money purchase schemes. Different to Occupational pensions, the employer negotiates a cheaper group rate with an external pension provider on your behalf and a personal contract is then set up directly between you and the provider.
Your employer deducts contributions from your pay and sends them to the pension provider along with any employer contributions. |
Employer pension schemes are regulated by The Pensions Regulator, a regulatory body for work-based pension schemes in the UK, established through the Pensions Act 2004. The Pensions Regulator has been set up to:
From 2012 all UK employers will be required to enrol their employees into a pension scheme - ask your employer how this may affect you.
- Protect the benefits of members of work-based pension schemes
- Promote good administration of work-based pension schemes
- Reduce the risk of situations arising that may lead to claims for compensation from the Pension Protection Fund
Your employer will have records of your pension and should be able to provide pension information and assistance to you throughout your employment with them.
If you change employers your pension may stop from the date you leave but is usually retained for the years you worked there. Always check Employers' leaving policies in these cases.
Download the UK Pension PDF Guide here - see our other free PDF guides here
Guide Contents
What is a Pension?
Why do you need a pension?
State and other types of Pension Schemes
Company or occupational pensions offered by Employers
Personal or private pension schemes
Shopping around for a personal pension scheme
Pension FAQs
Where can I go to get more help?
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