What are Workplace Pension Schemes?
One of the biggest financial threats to the UK economy is an ageing population, many of whom will have little in the way of savings in retirement. They will, therefore, have to rely on the state in old age and will find that they are left with too little to sustain a comfortable lifestyle.
The solution to this problem includes working for longer and investing more into our pensions during these working years.
To boost savings Workplace Pensions were introduced in 2012, following this every employer must offer and pay into a pension scheme for their employees. The amounts have increased over the years and currently stand at around 8/9% of salary, dependent upon which option is chosen by the employer.
Currently it is possible for staff to opt out of their Employer’s scheme, but this comes with a series of caveats and awkward procedures. These are designed to prevent employer influence and ensure the staff think long and hard about giving up not just valuable employer pension contributions but also tax relief on their contributions.
The employer’s duties are met once the contributions are paid across. At this point the accrued pension funds become the property and responsibility of the member. The member is then unable to access the pension benefits until they reach the age of 55. At this point there are many different rules as to how benefits can be taken. In addition, the employer has to make decisions about the underlying investments applying to the scheme, whilst staff need to understand the risks and rewards of different investment strategies once monies are in their account.