Workplace pensions and auto-enrolment
The state pension alone is not designed to be enough to result in an adequate retirement income.
The government provides tax relief for the workplace pension system. Auto-enrolment requires employers to provide a workplace pension scheme with a minimum employer contribution of just 3%.
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Auto-enrolment
There are minimum statutory requirements for employers to provide workplace pensions. An employer must enrol a worker (within three months) in a workplace pension if they are:
- aged 22+ and under the state pension age
- earning over £10,000 per year in one job
The employer must pay employer contributions of 3% on a salary between £6,240 and £50,270pam, if the employee pays 5% contribution (of pre-tax income).
An employee (any age over 18) earning over £6,240 can opt in. Or an employee can choose to opt out.
If an employer fails to provide a pension and the minimum contribution, an individual complaint can be made to the Pensions Regulator.
UNISON’s view is that the auto-enrolment minimum is not nearly good enough. We campaign to improve workplace pensions where inadequate and to increase the statutory minimum. The 3% employer contribution is very low by international standards, and the UK is an outlier in requiring a higher minimum contribution from employees than from employers.
Access to a public service workplace pension
Some employers, for example councils and NHS trusts, are required to provide their employees with access to the local government pension scheme and NHS pension scheme respectively. There are also some protections for staff who have been transferred out of the public sector to continued eligibility to be in the public service pension schemes.
Why you should consider being in your workplace pension scheme?
Workplace pension schemes involve:
- tax relief on your employee contributions
- employer contributions
If you are not in a workplace pension scheme then you are missing out on monies available to you from the government and your employer toward your retirement.
Defined benefit schemes, such as the LGPS and NHSPS, are particularly good value, as you build up to a secure retirement income linked to your employment, with benefits uprated with inflation and paid for life.
If you change employer before retirement
If you are in a defined benefit scheme and change employer with two or more years’ service, you can choose to leave the pension ‘deferred’ in the scheme and it will usually increase each year in line with inflation. You are able to join your new employer’s workplace scheme in the normal manner.
If you do not have two years’ service in the scheme, you can claim a refund of the pension contributions (less tax) you have made, or, if you have at least three months’ service you can look at transferring the pension you have built up to another qualifying pension scheme.
Care should be taken over decisions about whether to combine pensions or transfer benefits to an active pension. In particular, it is very unlikely to be beneficial to you to transfer entitlement out of a defined benefit pension into a defined contribution arrangement. You should access financial advice before taking such a decision.
If you move between employers who offer different defined contribution arrangements you should look carefully at the fees, projected investment returns, and any penalties that would apply if you transfer savings from one to the other. This is an investment decision, and you may wish to access financial advice.
Claiming your workplace pension
You commonly have to retire or take a ‘retirement break’ to be able to start drawing your pension.
You can draw your pension at your scheme’s normal pension age without early payment reduction. The minimum retirement age for most members is currently age 55. This is due to increase to 57 in April 2028. Some schemes will offer a protected minimum pension age for eligible members.
If you are considering accessing defined contribution savings pots, there is advice available from the government-funded Pension Wise service.
Frequently asked questions
Legal disclaimer
The information contained within this article is not a complete or final statement of the law and is based on the laws of England, Wales, Scotland and Northern Ireland.
While UNISON has sought to ensure that the information is accurate and up to date, it is not responsible and will not be held liable for any inaccuracies and their consequences, including any loss arising from relying on this information. If you are a UNISON member with a legal problem, please contact your branch or region as soon as possible for advice, or for non-employment matters call UNISONdirect.