Workplace pensions: A complete guide

Key takeaways

• To be auto enrolled into a workplace pension, you must be at least 22 years old, earn more than £10,000 per year, and be classed as a UK worker

• The minimum amount of money that needs to go into a workplace pension is 8% of qualifying earnings (between £6,240 and £50,270 for 2026/27), and of this the employer’s minimum contribution is 3%

• Tax relief is usually available on pension contributions up to the greater of £3,600 or 100% of relevant UK earnings, subject to the £60,000 annual allowance and any reductions that apply

What is a workplace pension?

A workplace pension is a pension scheme set up by your employer and is a tax-efficient way of saving and investing for your retirement.

You pay a percentage of your salary into the pension every month and your employer also contributes. This makes workplace pensions a beneficial way to save for your retirement as you’re effectively getting an extra bonus from your employer each month through their contributions.

To encourage people to save into workplace pensions, there are also tax benefits. On top of the money from your employer, you’ll also get tax relief from the government which you wouldn’t get in a standard savings account or ISA.

What are the different types of workplace pensions?

There are a few different types of pension you can set up through your employer:

Will I automatically be enrolled in my workplace pension?

All companies must provide a workplace pension scheme and you should be automatically enrolled if:

• You’re aged between 22 and state pension age 

• You earn more than £10,000 per year 

• You’re classed as a ‘worker’ in the UK. For example, you’re not supplying your services through a limited company

Your company should write to you when you start work to let you know that you are being auto enrolled into the pension scheme.

If you choose to opt out for any reason and change your mind, you can ask to rejoin, and if you remain eligible your employer must normally re-enrol you every three years.

What will my workplace pension contributions be?

With an auto-enrolment pension, the total minimum contribution is 8% with the employer’s minimum contribution being 3%. In some schemes, if the employer agrees to pay more, then you can pay less.  

Tax relief is usually available on contributions up to the greater of £3,600 or 100% of relevant UK earnings, subject to the £60,000 annual allowance and any reductions that apply.

What are the pros and cons of a workplace pension?

Workplace pensions are usually a good first option for saving for retirement but there are one or two downsides to consider:

Pros

• A tax-efficient way of saving for retirement  

• Your employer will usually contribute  

• Your contributions are automatically taken each month

• Can help you start saving for retirement earlier in your career, boosting long-term savings

Cons

• There may be a limited choice of investments

• You could have little control over how the scheme is run and the investment decisions

• Fund charges could eat into your investment returns

• Your employer may not contribute as much as you’d like

• You usually cannot access the money until age 55, rising to 57 from 6 April 2028

What are the workplace pension rules?

There are certain rules that govern how workplace pensions are run. These include:

• Your employer cannot refuse if you want to join their pension scheme 

• Your employer does not have to contribute to the pension if you earn less than £520 a month 

• Employers must contribute on earnings between £6,240 and £50,270 per year

• The employer must pay any minimum contributions on time 

• If you opt out, you can ask to rejoin. If you remain eligible, your employer must normally re-enrol you at least every three years

• Employers must offer a new workplace scheme if they close the existing one

Can I opt out of a workplace pension?

Yes, you can choose to opt out of a workplace scheme at any time, but this means you won’t have access to the employer contributions and tax benefits.

If you opt out, you can ask to rejoin. If you remain eligible, your employer must normally re-enrol you at least every three years.

Can I combine multiple pension pots from different jobs?

If you have multiple pension pots it might make sense to consolidate them all in one place.

While this is a possibility, there are some factors to consider including the type of pensions, how much they are worth and how well they are being managed.

Consolidating your pensions might help you keep better track of your pension savings. You might also be able to save money on charges and achieve better growth.

However, this is not always the case and if you’re unsure, you might consider taking independent financial advice, although you will usually have to pay for this.

Our guide on combining, consolidating, and transferring your pension can help further.

Other useful guides

We have lots of detailed guides to help you with your pensions decisions:

• What types of pension plan are available?

• Should I have a savings account or pension?

• How much should I be paying into my pension?

• How to find a lost pension

Get a private pension plan with our partner MoneyFarm

We’ve teamed up with MoneyFarm to help you choose the right private pension plan for your needs, using funds from the whole of the market.  

Open a new pension with MoneyFarm and you can make regular or one-off contributions as you wish. You can easily transfer old pensions into your new personalised plan. You’ll also get a dedicated Pension Adviser to answer any questions.

 If you need help tracing a lost pension or want them to check for any penalties or benefits, they can also do that for you, for a one-off fee of 1% of your pension value (taken at transfer from your pension pot).

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