What is a workplace pension?
A workplace pension is set up by your employer.
Depending on your age and salary, your employer may automatically enrol you into their workplace pension, normally with a minimum payment made by you each month. Your employer also pays in.
If you decide you don't want to be enrolled in the plan, you can choose to opt-out, this means you won't receive pension contributions from your employer.
How do workplace pensions work?
Each payday, a portion of your salary is automatically paid into your pension, and in most cases your employer also contributes. The money is invested to grow over time. Remember that investment returns are never guaranteed. So while there’s a chance your savings could grow, their value can also go down. This means you could get back less than you put in.
A workplace pension is a tax-efficient way to save. Each time you pay into your plan you will receive tax savings from the government.
Tax rules and legislation can change. Any tax savings you receive will depend on your individual circumstances and where you live in the UK.
Tax relief at source
When you pay into your pension from your salary or make a one-off contribution, you’ll get a boost from the government in the form of tax relief.
If you’re a basic rate taxpayer, you’ll automatically get 20% tax relief on money you pay into your pension. So for every £80 you put in, the government will top it up to £100.
If you pay income tax at a rate higher than the basic rate of tax, you could benefit from additional tax relief. The rates of tax are different depending on where you live in the UK. Tax relief also depends on your individual circumstances.
You can claim any additional tax relief from HM Revenue and Customs (HMRC).
Salary exchange
Salary exchange (also known as salary sacrifice) is a way of paying into your pension where you agree with your employer to exchange, or give up, part of your salary, and your employer pays that amount into your pension.
This exchange (or sacrifice) is usually linked to non-cash benefits your employer will provide.
These benefits could be:
- increased pension contributions
- cycle to work scheme
- healthcare.
The main benefit of salary exchange is you pay less income tax and less National Insurance Contributions (NIC), because of the reduced salary.
Your employer will also save on National Insurance. They may pay some or all of this saving into your pension, however they don't have to do this.
Already have a workplace pension with us?
Log in to your pension
Our online service lets you view and manage your plan. Register or log in.
Download our app
The Royal London app lets you view and manage your plan at any time.
Transfer a pension
Pensions transfers are when you combine or move other pensions savings into one plan.
Make a one‑off contribution
Understand the benefits and considerations of making a one-off contribution to your pension.
At Royal London we have three different types of workplace pension.
If you have a workplace pension with us, your employer will be able to tell you which type you have.
Group Personal Pension Plan
A Group Personal Pension (GPP) is a type of workplace pension set up by an employer. It’s a collection of individual pension plans.
Group Stakeholder Pension
A Group Stakeholder Pension (SHR) is very similar to a group personal pension. However, different rules apply to a group stakeholder pension.
The government has set minimum standards that companies must meet for a stakeholder pension. These are to do with contribution levels, costs, and terms and conditions.
Company Pension Plan
A Company Pension Plan (CMP) is a type of workplace pension set up by an employer. You may have also heard this called an occupational pension scheme. The plan is run by trustees on the employer’s behalf.
How to access your pension savings
You can normally access your workplace pension from age 55 (rising to 57 in 2028).
When it comes to accessing your pension savings you can:
- Take a cash lump sum
- Get flexible access to your savings, also known as pension drawdown
- Buy a secure income, also known as a pension annuity.
Whatever you decide to do, you can usually take up to 25% of your pension savings completely tax free.
Can I have a personal pension and a workplace pension?
You can have multiple pension plans, which can be workplace and/or personal pensions, with different providers.
You may have old workplace pension plans that were set up by a previous employer and you can choose to combine some or all of your plans into one. Read about pension transfers.
No matter how many different pension plans you have, there are limits on what you can pay in and receive tax relief on and this applies across all of your plans.
Can I opt out of a workplace pension?
Yes. You can opt out during a one month window after being automatically enrolled. This window and how to opt out will have been communicated to you as part of your welcome journey, or you can speak to your employer.
We'll refund any contributions taken during this period.
If you later wish to opt back in you should speak to your employer.
After the window, you can still leave the scheme, but your contributions will stay invested.
What is a Defined Benefit pension?
Defined Benefit pensions (commonly known as Final Salary Pensions) used to be more common, but most workplace pensions today are Defined Contribution (DC).
With a Defined Benefit pension, the income you receive is based on your salary and how long you were a member of the scheme. The scheme decides the amount you’ll get, rather than it being based on the value of your pension savings.
What are the costs and charges for my workplace pension?
Workplace pensions include charges for managing your plan and investing your savings. These are taken from your pension and can vary depending on your scheme and investments.