When commencing a new job, you should be automatically enrolled in your employer’s workplace pension scheme. You should stay in this scheme for the following reasons:
- It enables you to save for your retirement.
- Your employer also pays into your pension.
- The government contributes in the form of tax relief.
- You have no administration to do.
This article aims to inform you on how to get the most from your workplace pension scheme.
Start Early
Every day that passes is one day closer to your retirement. Consequently, you have a finite amount of time you can save for your post-working years. Therefore, the sooner you start saving, the better.
Of course, retirement can seem like a long way off. Also, you may not have thought about the lifestyle you want when you retire. Hence, you might find it challenging to put money aside for retirement.
Staying opted into your workplace pension scheme is an obvious choice. You don’t have to do anything to get it started, as you are automatically enrolled by your employer. Also, there is no administration for you to take care of, and your contributions are taken directly from your PA.
Set Contributions and Top-up Payments From Your Employer.
You typically contribute around 4% of your gross salary to your pension pot. Additionally, your employer pays at least 3% on top of this. With a further 1% tax relief, your total pension contributions amount to around 8% of your salary value. That’s roughly twice the amount you actually pay into it.
Remember, even though it is a workplace pension scheme, you remain in control. You can alter your contributions whenever you wish. Also, you can update, but you should only consider this in the direst circumstances.
Boosting Your Workplace Pension Pot.
Paying a little extra into your workplace pension can be highly beneficial in the long run. Although you agree to pay set monthly contributions, you can also pay additional amounts into your pension whenever possible. These extra payments will receive tax relief and long-term compound interest growth.
Should You Ever Opt Out of a Workplace Pension Scheme?
You would never opt out of a workplace pension scheme in an ideal world. Indeed, it should be the last option you consider.
However, if you are in a position where you cannot afford to put any money away before your retirement, opting out is a choice you can make. Before considering this option, you should seriously consider the long-term value of your pension scheme and how you will replace that income in your retirement.
Consider Your Future.
Earlier, we mentioned how convenient workplace pensions are and the lack of administration they require. However, one downside of this is that losing track of your pension is easy.
Indeed, if you frequently change employers, you might lose track of your money. Also, old pension schemes may not perform well or suffer from high charges. They could be losing money if you do not take responsibility for these pensions and check them regularly.
When you change employers, you stop contributing to your old workplace pension scheme and start paying into your new employer’s one. At this point, you should decide what to do with your old pension. For instance, should you retain it as it is or transfer the funds into another scheme?
These decisions can have a significant effect on your retirement finances. Therefore, consulting a regulated financial advisor is worthwhile to get advice on your best options. Check out Portafina.
Government Regulatory Changes
Government regulatory changes can affect your pension. For example, the government introduced regulations around pension freedoms in 2015. These changes open the way for many people to access their pension funds from 55. However, it did not apply to all pensions, so you should check with your provider if it does to yours.
Regardless, you should keep abreast of new regulations affecting your pension and how you access your funds.
Conclusion
Workplace pensions are helping millions of UK workers save for their retirement. They involve no administration on your part, and you should be enrolled into a scheme automatically. Hopefully, this brief article has highlighted the benefits of workplace pensions and helps you get the most out of your scheme.