What is a Company Pension?
In its simplest terms a company pension scheme is a pension which is set up by an employer for its employees. The employer pays a percentage of your salary into a pension scheme on payday.
It is often questioned if it is a wise decision to take a workplace pensions, considering that both your employer and the government contribute into your pension scheme and contributions are not liable for income tax they have their benefits.
A key feature of the scheme is auto enrolment – employees are automatically enrolled by default but they do have the option to opt out if they wish. National Employment Savings Trust (NEST) is a workplace pension introduced as a result of the Pensions Act 2008 and designed to provide a simple, low-charging scheme to meet the workplace pension scheme requirements. NEST is run by the NEST Corporation, a trustee body, with day-to-day operation undertaken by the executive team. The main aim of NEST is to offer a low-cost pension scheme that is simple to understand and operate.
In order to meet the workplace pension requirements, employers can use NEST as the main scheme or as a supplementary scheme. Alternatively they can use an existing scheme or set up an alternative new scheme, providing any scheme meets the qualifying requirements. The original expectation was that most schemes would operate on a defined-contribution basis, although existing defined-benefit schemes are acceptable if they meet certain minimum requirements.
Employees are still being automatically enrolled as automatic enrolment is being phased in, starting with the largest UK employers. So if you’re eligible (see below) and haven’t yet been enrolled into your workplace scheme, you should be by 1 February 2018, at the latest.
To find out more on company pension scheme talk to a financial adviser and find out how they affect you and your retirement provisions.