If you’re employed, your employer must have a workplace pension scheme in place. If you meet the following criteria, your employer will enrol you into their pension scheme and make payments into your pension:
- You’re a UK resident, usually working in the UK
- You’re aged between 22 and the state pension age (check your state pension age)
- You earn at least £10,000 a year
In your pension, there’s a minimum total contribution requirement of 8%. This is usually built up of your employer contributing at least 3% and you, as the employee, contributing the remaining 5%. Whilst 3% is the legal minimum requirement, many employers may choose to contribute more.
If you’re under the age of 22, you can ask to be enrolled into a pension scheme. Your employer must let you join the scheme if you’re between 16 and 74 years old. At a young age, retirement may seem like a long way away, but it helps you to start saving for a more comfortable life at an older age and may mean you might even be able to retire earlier than planned.
An employer is unable to unfairly dismiss or discriminate against you for being in their workplace pension scheme, nor can they encourage or make you opt out.
What happens when I’m auto-enrolled?
Once you’ve been auto-enrolled, your employer will write to you explaining:
- The date you entered the scheme
- Details about the scheme, including who runs it
- How much they’ll contribute and how much you’ll be paying
- How you can leave the scheme
- How tax relief applies to you
When will I receive my pension?
Pension schemes usually set an age when you can access your pension, normally between 60 and 65 years old, but the earliest age is 55 years old.
In some circumstances, including if you’re retiring early because of ill health, you may be able to access your money before you turn 55.
When you reach your pension maturity date, you can take 25% of it tax-free as a lump sum and you’ll pay income tax on the rest as you receive it monthly.
If you try to take money out of your pension before you turn 55, you may pay tax of up to 55% of the pension value.
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