Workplace Pensions are actually quite simple and they apply to you if you are employed, are between certain ages (currently 22 and State Pension Age) and earn above a certain amount of money (currently £10,000 for the 17/18 tax year).
Every time you pay into a pension, so does your employer, and so does the Government via tax relief. A Workplace Pension should, therefore, be a better way to save for later in life than putting money in the bank!
If you work and are eligible for a Workplace Pension you will automatically be put into the scheme unless you tell your employer that you want to opt out. This is called “Auto-Enrolment”. It’s therefore important to read any letters you get from your employer so you don’t miss out on your choices.
The amount that you need to pay into a Workplace Pension is set out automatically with rates going up over the next few years so more money will be taken from your pay, and more money will be put in by your company unless you tell your employer to stop.
But less money in your pay packet in return for a pension is not necessarily bad news. Your employer has to choose a reputable pension provider who will invest the money on your behalf, and these investment returns will be tax free! You will have to wait until you are at least 55 to get the cash out but in the mean time your money will be invested and should increase in value over time.
But why is saving even important? Until recently many people retired in their 50’s or 60’s and could be expected to live another 10 or 20 years. Now, with medical advances meaning that we live long, we could be retired from work for almost as many years as we actually worked. Let’s think of this as having lots of “gap years” at the end of your life. If you want to enjoy these you are going to need a lot of money saved up. The earlier you save, the more time your money has to earn interest and the larger your pile of cash will be when it’s time to kick back and have fun.
If you are about to be “Auto-Enrolled” it’s important that you understand what will happen to your take home pay when it happens. Some people might be shocked by the drop in their monthly income and decide to opt out after all, which may not be the best thing to do in the long term. If you have any questions about the pension you are being auto enrolled into the first port of call is your employer who will be happy to help, although they can not give you advice on whether to join or not.
There is also loads of info here.