What are my pension rights

According to Francis Goss, chief commercial officer at consultancy AHC, employees, especially younger workers, do not understand their pension rights and could be risking their financial stability in the future. Here, we explain what these rights are and how the auto-enrolment scheme works.

The Pensions Act 2008 introduced an auto-enrolment scheme which places a statutory duty on employers to enrol all of their ‘eligible jobholders’ into a ‘qualifying pension scheme’. You can voluntarily opt-out of this.

Your employer has 3 months to enrol you and make pension contributions, if:

• you are a ‘worker’
• you are aged between 22 and State Pension age
• you earn at least £10,000 per year
• you ‘ordinarily’ work in the UK

If you are not eligible, you still have the option of joining.

What are my employer’s responsibilities when it comes to my pension?

Employers are required to:

• contribute to the scheme (unless you earn less than £490 per month, £113 per week, or £452 per 4 weeks).
• refund money you have contributed if you opt out within 1 month.
• let you re-join the scheme at least once a year if you’ve previously opted out.
• enrol you again once every 3 years if you have opted out and you are still eligible for automatic enrolment.

Your employer must tell you the date you were enrolled, the type of pension scheme, the amount being contributed by you and the employer, how to opt-out, and any tax relief.

The Government has set minimum levels of contributions; if the employer does not pay the minimum, you will need to make up the difference. On 6 April this year, the minimum total pension contribution required for auto-enrolment pensions increased to 5%. According to the Pensions Regulator, employers will need to pay in at least 2% and an individual up to 3%.

The total minimum contribution will increase further to 8% next year on 6 April 2019, and employers will be required to at pay least 3% into the scheme with the employee making up the rest of the minimum contribution.

How is my pension protected?

The protection of your pension will be determined by the scheme you are on:

• If the organisation shuts down, you won’t lose your pension as it is usually run by a provider.
• If your pension provider ceases trading and is authorised by the Financial Conduct Authority and can’t pay you, you can claim compensation from the Financial Services Compensation Scheme.

Accessing your pension

Most pension schemes set an age when you can access your pension (usually between 60 and 65). In some circumstances you can access from the age of 55, but this may mean paying tax of up to 55%.

What happens to my pension if I change jobs?

Your workplace pension belongs to you even if you don’t continue paying into the scheme, the money remains invested and you’ll receive the pension at the relevant pension age. You can join another workplace scheme in the event your employment changes.

If you do, you may be able to carry on making contributions to your old pension or combine the old and new pension schemes.

If you change jobs but pay into an old pension, you may not get some of the pension’s benefits if they’re available to current workers only. If you worked at the organisation for less than 2 years before leaving, you may be able to get a refund on the contribution made. If you have any questions regarding this, we would always recommend you check with your employer or provider.

Paid leave and my pension

During paid leave, you and your employer will continue making pension contributions.

Maternity, parental leave and my pension

You and your employer will continue to make pension contributions if you are in receipt of maternity pay. If you are not entitled to maternity pay, your employer is required to make pension contributions for the first 26 weeks of your leave (‘Ordinary Maternity Leave’). Contributions will continue after this period if it is part of your contract.  We would always recommend you check your employer’s maternity policy for clarification on this point.

If you have questions about your pension rights, you can contact a member of the Employment team on 02380 717717 or email employment@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.