Options available when an occupational pension is not provided
Your employer is required to offer you the chance to join a pension scheme. If an occupational pension is not provided then this would normally be a stakeholder or alternative personal pension.
Your employer must offer you access to a stakeholder pension, so long as both the following apply:
– you earn more than the National Insurance lower earnings limit
– there are five or more employees where you work
Your employer does not have to offer you access to a stakeholder pension if one of the following apply:
– you are able to join an occupational pension scheme
– you are able to join an alternative personal pension scheme where your employer pays in an amount equal to at least 3 per cent of your pay
Your employer must allow you to pay into your stakeholder pension directly from your wages through the company’s pay system. Many employers are prepared to pay into your stakeholder pension and to pay the cost of the stakeholder pension provider’s administration charges. However, they are not required by law to do so.
If you leave your employer, or transfer your money out of the stakeholder pension scheme to another scheme, you don’t lose the money your employer has already paid in. The requirement for employers to provide access to stakeholder pensions are regulated by the Pensions Regulator.
If your employer offers you an alternative personal pension instead of a stakeholder pension, its terms must meet minimum standards set by the government. Your employer is obliged to contribute the equivalent of at least 3 per cent of your salary if they are offering it as an alternative to a stakeholder pension. But they don’t have to pay the administration costs of your pension scheme.
Your employer may arrange for a pension provider to set up a personal pension arrangement through the workplace. A personal pension (including a stakeholder pension) arranged in this way is called a ‘Group Personal Pension Plan’ (GPPP).
Although they are sometimes referred to as company pensions, they are not run by employers and should not be confused with occupational pensions. A GPPP is a type of personal pension where your employer chooses the financial provider on your behalf.
Some advantages of contributing to a GPPP arranged by your employer:
your employer will normally contribute to your pension and if the GPPP is offered as an alternative to a stakeholder pension your employer must contribute an amount equal to at least 3 per cent of your basic salary
– if your employer has contributed to your pension and you leave your employment you do not lose the money they have contributed
– your employer will normally deduct your contributions from your pay and send them to your pension provider
– a GPPP is negotiated with the pension provider on behalf of a group of people and your employer may be able to negotiate better terms than you would get individually, for instance, they may negotiate reduced administration costs
– you will usually be able to continue making contributions to your pension if you change employers
