Workplace pensions

A workplace pension scheme is arranged through your employer and run by scheme trustees or managers. Your employer will usually take money from your salary and pay it directly into the pension scheme. Your employer and the government will usually contribute money to the scheme too.

The different types of workplace pensions include:

  • company pension schemes
  • multi-employer schemes
  • group personal pension schemes
  • group stakeholder pension schemes
  • group self-invested personal pension schemes (SIPPs).

Since 2012, it’s been compulsory for employers to enrol their employees into a pension scheme. This is called automatic enrolment. If your employer thinks this is suitable for you, you will be enrolled in a workplace scheme by February 2018 at the latest. But you can choose to opt out either immediately or in the future.

If you get sick pay during a period off work, you could continue to build up your workplace pension as normal. But this is not always the case. To check if your pension will be affected by time off or reduced hours, talk to your employer, the HR department at work or the pension scheme manager.

What is a workplace pension?

Workplace pension schemes are arranged through your employer and run by scheme trustees or managers.

There are different types of workplace pensions and the exact details of the pension will vary from employer to employer.

How do they work?

If you belong to a workplace pension scheme, you usually pay a certain amount of your salary into the scheme on each payday. Your employer will take money from your salary and pay it directly into the pension scheme. Your employer and the government will usually contribute money to the scheme too.

How you can access your pension savings will depend on what type of workplace pension scheme you have (see below). 


Automatic enrolment in workplace pensions

Since 2012, it’s been compulsory for employers to enrol their employees into a pension scheme. This is called automatic enrolment. It is being phased in over a period of time, starting with the largest UK employers first. To be eligible for automatic enrolment you must be:

  • aged 22 or older
  • under State Pension age
  • earning at least £10,000 a year
  • working in the UK under a contract of employment.

If you’re eligible, you will be enrolled in a workplace scheme by February 2018, at the latest. But you can choose to opt out either immediately or in the future. Your employer must also pay money into the scheme.

Opting out

Automatic enrolment puts you into the pension scheme, but you can choose to leave it immediately if you want to. This is called opting out with immediate effect.

If you opt out within a certain time period, your money will be returned to you as though you had never joined the pension scheme in the first place. Your employer will send you information about how to opt out and the time period you have to do this by.

If you do opt out, your employer has to put you back into the pension scheme every three years – as long as you’re still eligible.

You may want to opt out for a while if the cost of cancer is affecting your household income. But think carefully before doing this because you will end up with lower benefits in the future. The pension scheme may also offer early retirement due to ill health and life insurance cover. So it might be worth continuing with your payments if you can.

For more information about automatic enrolment, visit the GOV.UK website or call our financial guides on 0808 808 00 00.


Types of workplace pension schemes

These include:

  • company pension schemes
  • multi-employer schemes
  • group personal pension schemes
  • group stakeholder pension schemes
  • group self-invested personal pension schemes (SIPPs).

Company pension schemes

These are run by your employer and are also known as occupational pension schemes. The two main types are:

  • Defined contribution schemes – where you and your employer, if you have one, pay money into a pension which is invested.
  • Defined benefit schemes – where your employer promises to give you a pension when you retire, usually based on your salary and how long you have been a member of the scheme.

Multi-employer pension schemes

Some employers may use an organisation such as NEST (National Employment Savings Trust) to provide a multi-employer pension scheme. These are a form of defined contribution scheme and work in the same way.

Group personal pension schemes

Personal pensions are always defined contribution schemes.

Group stakeholder pension schemes

Stakeholder pensions are a type of personal pension that have to meet minimum standards set by the government. The GOV.UK website has more information. These are a form of defined contribution scheme.

Group SIPPs

Group SIPPs are a type of personal pension where you can choose to invest in a wider than usual range of investments. For example, directly into shares and even commercial property. Visit the Money Advice Service website to find out more. These are a form of defined contribution scheme.


Taking time off or reducing your hours

If you get sick pay during a period off work, you could continue to build up your workplace pension as normal. But this is not always the case. If you’re off work for a long period, your pension may stop building up.

If you use your holiday allowance to take time off to care for someone, your pension won’t be affected. When your allowance is used up, your pension may be affected.

If you cut back your hours and this means you’re paid less, this is likely to reduce the workplace pension you’re building up.

In all these situations, exactly what happens depends on your work contract and the rules of the pension scheme.

To check if your pension will be affected by time off or reduced hours, talk to your employer, the HR department at work or the pension scheme manager.

Back to Pensions

Understanding pensions

There are many different pension schemes available, including the State Pension paid by the government.

Pension changes

Since April 2015, some types of pension have become more flexible.

State pensions

The State Pension is a regular payment you can get from the government when you reach retirement age.

Personal pensions

Personal pensions are often available through your workplace. But self-employed people often have them too.

Defined benefit schemes

A defined benefit scheme is when your employer promises to give you a pension when you retire.