What is a Workplace Pension?
Important information - A workplace pension is meant for your retirement, so you can’t normally access your money until you’re 55 (57 from 2028). Pension and tax rules can change and any benefits depend on your circumstances. Investments go down in value as well as up so you could get back less than you invest. This is not personal advice. If you’re not sure which investments are right for you, we can put you in touch with one of our financial advisers.
Starting with the basics
If you’re working in the UK, your employer will usually enrol you into a workplace pension. You can check your eligibility with your employer if you’re unsure.
A workplace pension is a way of saving for your retirement.
The idea is simple. You and your employer pay into the pension each month and you can access the money when you reach retirement.
Let's take a closer look at how it works.
How do workplace pensions work?
A workplace pension is a long-term investment plan which you build up over your working life to provide income in later life when you stop working. And it's boosted by some of the most generous tax perks available.
- You generally pay in money regularly
- Your employer pays in money too
- You get tax benefits from the government
- Your money is invested in the stock market to give it the best chance to grow over the longer term, though of course there are no guarantees
- Your pension pot is normally locked away until age 55 (57 from 2028) when up to 25% can be taken tax free with the rest taxed as income
Do I need a workplace pension?
Even though you are likely to be eligible to receive the State Pension, it's unlikely that it will be enough to live on in retirement by itself.
To enjoy a comfortable retirement, it's likely you'll need to pay into your workplace pension too.
As a rule of thumb, each year you should save around 12% of your salary into your pension. That’s based on having a 50-year career.
It might seem like a lot, but employer payments and tax relief will help you along the way.
And the earlier you pay into your pension, the longer your money has to grow.
Where is my workplace pension saved?
Your workplace pension is invested in the stock market to give it the best chance of growing over time.
If you haven't made any other investment choices, your money is invested into a 'one-size fits all' default fund.
But, like all investments, it will go up and down in value over time. Depending on how your investments perform, you could get back less than you invest.
If you'd like to choose your own investments – as well as, or instead of the default fund – take a look at some of your other options.
What is a default fund?
Watch our short video to understand more about your workplace default investment.
Please note: This video is not personal advice. All investments and income can fall as well as rise in value, so you could get back less than you invest. If you’re unsure of the suitability of an investment or course of action for your circumstances, please seek advice. Past performance shouldn’t be seen as a guide to the future.
How much should I pay into my workplace pension?
Put simply, the earlier you start saving into a workplace pension, the better.
To target a comfortable retirement, it's worth paying in 12% of your salary each year. Over a 50-year working life, you’ll have a good chance to reach your retirement goals.
It might seem like a lot but contributions from your employer and tax relief can help along the way. And the earlier you pay in, the longer your money has to grow.
Is your pension on track?
Use our pension calculator to discover how much your pension might pay.
Deciding how much to contribute to your workplace pension
There are limits on how much you can pay in to your workplace pension each year. If you go over the limit, you could get a hefty tax bill. So it's important to check how the rules apply to you.
Pension and tax rules can change and benefits depend on individual circumstances.
Can I increase or decrease my workplace pension contributions?
Yes, you can.
However, your pension contributions come straight from your salary, so you'll need to get in touch with your HR or payroll department to find out how to make your own changes.
When can I get access to my workplace pension?
You can take money from your pension from age 55 (57 from 2028). You don’t have to access your pension all at once or by any set date. You might decide to take it in stages, maybe to help support you through semi-retirement.
How do I prepare for retirement?
Workplace pensions are more flexible than ever. There's a world of different retirement options, and you can mix and match.
With our help, you can create your own retirement journey depending on what you need.
What you choose to do with your pension is an important decision. Make sure to understand all your options and their risks to check you’re making the right decision for your circumstances.
How safe is my workplace pension?
You can visit our Security Centre to find out more about Hargreaves Lansdown and the safety of your investments.
Guidance, help and advice
Guidance from MoneyHelper
MoneyHelper provides impartial guidance on a range of pensions and retirement topics.
It’s government-backed and free to use. However it won’t give you personalised recommendations.
Have a question?
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Call us on 0117 314 1795.
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Retirement Advice from HL
Retirement is a time when you may feel unsure about what to do with your money and need help to make decisions. Our financial advisers can work with you to:
- Plan your personal budget and retirement income strategy
- Make sure your investments match your goals
- Give pension advice, including when and how to take them