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How does my workplace pension work?

If you are part of your employer's DC arrangement, you will pay into this each month, along with your employer and the Government (via tax-relief).





Budgeting for the year ahead


When paying in to your workplace pension, often, there will be a minimum amount that you will be required to pay into to get your employer's contribution. 

The amount that you and your employer pay into the arrangement will often be a percentage of your salary i.e. 5%. The amount your employer pays will often be dependent on your role within the company. Alternatively, your employer may opt for salary exchange meaning that you basically sacrifice a part of your salary, and instead of making any direct contributions into your pot, your employer makes this on your behalf (using the salary you gave up).

When this money is paid into your pension each month, it is invested in the stock market via a fund, or range of funds. You may also have some of your pot in cash if you opt for a low risk investment or are nearing retirement and expect to need access to your funds in the very near future. If you do not opt to select a particular fund or funds to be invested in, you will automatically be invested into the default fund arrangement.

There are a range of considerations to bare in mind when selecting your investment, for example, you may wish to consider ethical considerations, as well as the fund charges. If you are invested in your employer's scheme default fund, the charges are likely to be relatively low as the fund is designed to provide moderate returns. Alternative funds that may offer higher returns may include higher fund charges.