What is an occupational pension?
Wanting to know more about occupational pensions? This guide will talk you through occupational, or workplace, pensions – what they are, how they work and what happens when you change jobs.
An occupational pension, more commonly known as a workplace pension, is a type of pension arranged by your employer.
How does it work? Well, a percentage of your pay goes into your occupational pension every payday, on top of your state pension. This means your occupational pension is paid in to separate from your National Insurance contributions to your state pension.
Since 2012, an occupational pension is a mandatory scheme that all employers must provide. This is called ‘automatic enrolment’. Your employer must also make contributions to your occupational pension if:
- You’re aged between 22 and state pension age
- You earn at least £10,000 per year
- You’re officially classed as a ‘worker’
As mentioned above, an occupational pension is a mandatory requirement your employer must provide.
Your employer has to communicate the following with you when enrolling you in an occupational pension scheme:
- The date you were added to the pension scheme
- The type of scheme and the provider
- How much they will contribute and how much you will contribute
- How to leave the pension scheme
- Information about tax relief
What types of occupational pensions are available?
So, there are two main types of pension scheme that are available through an occupational, or workplace, pension.
These are ‘defined contribution’ pensions and ‘defined benefit’ pensions. For more information on these, and the differences between the two, see our ‘What is a pension?’ page.
When can I claim my occupational pension?
You can usually take your occupational pension from age 55 at the earliest. You also have the right to claim your occupational pension at the current state pension age of 65.
What happens to my occupational pension if I change jobs?
It’s really simple: your occupational pension always belongs to you, and you don’t need to worry about losing the money you’ve already contributed to it.
If you’re changing jobs, you can take out a new occupational pension if you wish to and you can combine your old and new pension schemes.
What happens if my employer goes bust?
No need to worry: your occupational pension is provided by a pension provider and will remain protected by the Pension Protection Fund.
How do I leave an occupational pension?
So, if you’ve been automatically enrolled in an occupational pension scheme, you can opt-out if you want to by contacting your pension provider. You’ll need to communicate with your employer and find out how to do this through them.
If you opt-out within a month of being enrolled, you will be repaid all the money you paid in. However, if you opt-out later your money will remain in your pension pot and you’ll be able to access it when you retire.
If you’ve got further questions about your occupational pension, you can contact the DWP Workplace Pension Information Line on 0800 731 0372.