Every payday, a percentage of the employee’s pay is deducted automatically from their salary or wages and invested in the scheme. The employer also contributes to the scheme on the employee’s behalf as does the government in the form of tax relief.
In a ‘defined contribution scheme’, the employee’s retirement income is based on the contributions made, whereas in a defined benefit scheme, the employee’s pension income is based on his or her salary and length of service with the employer. Most occupational pension schemes are defined contribution schemes.
Whether the scheme is managed by insurance companies or by the employer, the pension funds are not available to creditors of the employer, so employees’ pension pots should not be affected if the employer goes bust. If the scheme is a trust-based scheme, employees will still get their pensions, although not as much because the scheme’s running costs will be paid out of members’ pension pots rather than by the employer.
Under ‘Automatic enrolment’ rules, any employer (with at least one member of staff) must automatically enrol every employee between the age of 22 and State Pension age and earning in excess of £10,000 a year (2023/24 tax year) into a ‘Workplace pension scheme’.
The minimum contribution for employers is 3% of the employee’s earnings, whilst employees are obliged to contribute a maximum of 5% of their earnings before tax.
Advice on auto enrolment pensions is not regulated by the financial conduct authority.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
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Miller Financial Planning Ltd
Eastlands Court Business Centre
St Peters Road
Rugby
Warwickshire
CV21 3QP
T: 01788 577775
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Miller Financial Planning Ltd is an appointed representative of Quilter Financial Planning Solutions Limited, which is authorised and regulated by the Financial Conduct Authority. Registered as a limited company in England & Wales No:06752854. Registered Office: Eastlands Court Business Centre,St. Peters Road, Rugby, Warwickshire, CV21 3QP.
The Financial Conduct Authority does not regulate advice on commercial and agricultural mortgages, some buy to let mortgages, or advice on some tax matters.
The information and content within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK.
Approval Quilter Financial Planning Solutions Limited. 05/05/2023
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