Workplace pensions are a strange and confusing part of adult life, and are only worth something if you start working on it now. Some people have automatic enrolment pension schemes to make life simpler, but they know next to nothing about what they’re agreeing to. It’s not important to know the ins-and-outs of the scheme to know if you’re in or out, but it pays to know just enough not to get the wool pulled over your eyes.
What Is and Isn’t There
First, some companies like to use different terms for workplace pensions, such as occupational, company, works, and work-based. They all refer to the same thing, and pensioners shouldn’t get confused about which is which. To be fair, companies don’t employ these terms with confusion as the objective, it’s just a small way some businesses do to standout.
The pension scheme works similar to taxes, a percentage of the pay is automatically put into the pension scheme every payday. Hey, you can’t miss what you never thought you had right? In many cases, the government and the company you work for also contribute to the pension scheme. The collected sum is used to pay you after you retire, and do with what you will.
Limits and Requirements
The limit for cashing in on your pension is 55, the only exception is if you’re seriously ill, and desperate for treatment money. The government requires companies to enrol workers in auto enrolment pension schemes if they follow a certain criteria. The first requirements is that you (the worker) are at least 22 or the State Pension age; second, you must earn more than £10,000 a year; and last, must work in the UK.
Now, here’s where things get a bit tricky. If you pay income tax, the government provides tax relief in the form of pension contributions. If you don’t pay income tax, the government can still provide tax relief contributions to your pension fund if your scheme uses relief at source. On the other hand, your employer is legally required to contribute to your pension scheme, and will take the money from your qualifying earnings.
The percentages may be daunting and difficult to calculate. But on the lighter side, they’re all set to rise by 2018, which means more money after retirement, and isn’t that what life is all about?