If you have been employed for some time or just started a new job, you should be enrolled in a workplace pension scheme. These schemes help millions achieve a comfortable retirement, and they come with the following benefits:

  • You regularly save for your post-working years.
  • You receive contributions from your employer.
  • You are enrolled automatically, and all administration is done on your behalf.

Get Started Immediately

Pensions are a long-term savings mechanism. As such, you can maximise your investment’s time to grow by getting started immediately. 

Of course, your retirement can seem a long way off, making it challenging to understand the lifestyle you want and how much that will cost. Consequently, you might struggle to get the motivation to save for retirement and put your preparations off.

It’s in such situations that workplace pensions are even more beneficial. As everything is done for you, your financial planning is more straightforward. Planning for your long term future is crucial; when considering your pension, take on expert advice from a specialist such as Portafina. 

Set Contributions By You and Your Employer

With a workplace pension, around 4% of your gross salary is paid directly from your monthly pay packet. This amount is matched by a minimum 3% contribution from your employer and another 1% in tax relief. Therefore, every pound you put into your pension pot gets matched by another one for free.

Although everything happens automatically, it doesn’t mean you have no control over your workplace pension funds. Indeed, you can alter your contributions whenever you want. You also have the option of leaving or pausing your pension, although this should be a last resort, as we’ll explain later. 

Give Your Pension Funds a Boost

We’ve just mentioned that you have the option to adjust your contributions whenever you want. However, to maximise your funds, it is best to give them a boost whenever possible. 

Most workplace pensions allow you to make additional top-up contributions, which can significantly affect your pension funds. Even small additional amounts paid into your pension will benefit from tax relief and compound interest growth over many years. 

The investment growth that results from these can give you much more money when your pension matures. Therefore, you should make additional contributions when you can.

Should You Ever Opt Out of a Workplace Pension Scheme?

We would never recommend that you opt out of a workplace pension scheme. However, we realise that there could be extreme circumstances whereby you might not be able to make contributions. 

You do have an option of withdrawing from your workplace scheme, but you should only consider doing so if you cannot afford the monthly contributions. Remember, you effectively receive free money in employer contributions if you leave your workplace pension scheme. 

Consequently, you could lose thousands of pounds if you opt-out. Moreover, you could jeopardise your chances of a comfortable retirement. 

Consider Your Future

We’ve already stated that one of the most significant benefits of a workplace pension scheme is that everything happens automatically. However, this is also a downside, as it takes much of your long-term savings planning out of your hands. 

Indeed, many people fall into the trap of believing their retirement is completely sorted just because they have a workplace pension. The reality is that you need to remain conscious of where your money is going and how your funds are performing. 

For instance, if you change jobs, the money you’ve paid into your old workplace pension remains invested as it was. In certain circumstances, you can continue to pay into your old scheme, but your old employer’s contributions will cease. 

More likely, your contributions will stop, and you will start paying into a new pension scheme. Therefore, you should consider whether it is best to leave your money where it is or transfer your funds to another scheme. 

What is not appropriate is to merely leave your funds and hope they will perform as you had planned. High charges and poor returns mean that your pension funds could be eroded. 

Therefore, when you change jobs, consider speaking with a financial advisor and finding out what your best options are for your pension. Your money might be better off where it is, or you could get a more significant return elsewhere. 

Regulatory Changes

Pensions and investments can be influenced by changes in government regulations. One of the most recent and significant changes came about in 2015 with the introduction of Pension Freedoms. 

Introducing these regulations gave thousands of people more control over their pension funds. One of the main aspects was to allow access from age 55. However, this option might not be suitable for everyone as it can leave you short of income later in your retirement. Again, a financial advisor can run you through your best options.