What Is a Workplace Pension?
A workplace pension is a retirement savings scheme arranged by your employer. Since the introduction of auto-enrolment in 2012, most employers in the UK are legally required to enrol eligible workers into a pension scheme and make contributions. Over 10 million workers have been automatically enrolled since the scheme began.
Auto-Enrolment: Who Is Eligible?
You will be automatically enrolled into your employer’s pension scheme if you:
- Are aged between 22 and State Pension age
- Earn at least £10,000 per year (the earnings trigger)
- Work in the UK
If you do not meet these criteria, you can still opt in to your employer’s scheme voluntarily, and your employer must contribute if you earn above the lower earnings threshold of £6,240.
Minimum Contribution Levels
| Contributor | Minimum % | Example (on £30,000 salary) |
|---|---|---|
| Employee | 5% | £1,188/year |
| Employer | 3% | £713/year |
| Total minimum | 8% | £1,901/year |
These percentages are calculated on ‘qualifying earnings’ – the band of earnings between £6,240 and £50,270 (2025/26 figures). Many employers offer contributions above the minimum, and some match higher employee contributions.
Opting Out
You have the right to opt out of your workplace pension within one month of being enrolled. If you opt out within this period, your contributions are refunded. However, opting out means you lose your employer’s contributions – which is effectively giving up free money.
If you opt out, your employer must re-enrol you approximately every three years, giving you another opportunity to join.
Types of Workplace Pension
Defined Contribution (DC)
The most common type. Your pension pot grows based on how much you and your employer contribute and how the investments perform. Your retirement income depends on the size of the pot when you retire.
Defined Benefit (DB)
Also known as final salary or career average pensions. These promise a specific income in retirement based on your salary and years of service. DB schemes are now rare in the private sector but still common in the public sector.
Making the Most of Your Workplace Pension
- Maximise employer matching – if your employer matches contributions up to 6%, contribute at least 6%
- Review your investment options – the default fund may not be optimal for your situation
- Increase contributions gradually – add 1% each year or each time you get a pay rise
- Consolidate old workplace pensions – transfer previous employer pensions if it makes sense
- Check for salary sacrifice – this can save you National Insurance as well as income tax