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Tuesday, 2 October 2023

You're not sure if a workplace pension is right for you

Your situation will influence how a pension from your employer can benefit you or if you need to opt out. Find out how already having a pension, being in debt and your age may affect your decision to stay in a workplace pension or not.

Already have a personal pension

If you already have a personal pension, you need to think about what you can afford and what your personal and employer’s pensions are offering. The Pensions Advisory Service might be able to help you. The Pensions Advisory Service is an independent, non-profit making organisation which provides free advice about pensions.


For many people, paying into a workplace pension is a good idea, even if you have other financial commitments, such as a mortgage or loan. This is because you could benefit from contributions from your employer and the government, in the form of tax relief. Over time, this money adds up and can grow. You should make sure first that you can afford to meet your other commitments.

If you’re behind on your mortgage, rent, credit card or other debt payments then a pension might not be the right step at the moment. It’s something you should come back to at a later date, once your debts are more under control.

If you’re struggling with debts and would like advice on managing your money, you might find the Money Advice Service a good starting point.

Think you’re too young

It may seem early to start planning for later life but remember you could have twenty years of retirement and you will need an income. A workplace pension is one way to provide that income. As well as your payments, you could benefit from contributions from your employer and the government. Usually, the younger you are when you start paying into a pension the better. The money has more time to grow.

So even if it’s only a small amount, the money you put away early in life can build up over time.

Think you’re too old

Unless your retirement is just a few months away, there’s still time to build up some money for your later years. And staying in a workplace pension is worth considering.

Unlike other ways of saving, being in a workplace pension means you aren’t the only one putting money into your pension. If you earn more than £5,564 a year, your employer has to contribute too.

You'll get a contribution from the government in the form of tax relief. This means some of your money that would have gone to the government as income tax, goes into your pension instead.

When you retire, you might be able to take your pension savings as a cash lump sum. You can do this if your total pension savings are no more than a certain amount (£18,000). You have to be at least 60 to do this. If your pension pot in any pension scheme is up to £2000, you will be able to take your pension from that scheme as cash. This is regardless of any other pension saving you have. (This does not apply to defined benefit workplace pensions). To find out more, check with whoever runs your pension scheme. For more information about the types of workplace pension see the link 'Types of workplace pension'.

Have a very large amount of pension savings and have ‘enhanced protection’ or ‘fixed protection’

People with pension savings over a certain amount (£1.5m in 2012-13) at the time they take their pension are liable for a tax charge. This is called the ‘lifetime allowance charge’.

In the past, people with very large pension savings could apply for protection from this tax charge. This was called ‘enhanced protection’ or ‘fixed protection’.

If you have ‘enhanced protection’ or ‘fixed protection’ and you’re automatically enrolled into a workplace pension, you’ll lose your protection if you don't opt out.

When you’re automatically enrolled, your employer has to tell you the start and end dates of the one month opt-out period. They must also explain what you need to do to opt out.

If you lose protection, you must tell HM Revenue & Customs.

A note about the earnings figures

If you earn more than £5,564 a year and you are in a workplace pension, your employer has to contribute to it. If you earn £5,564 or less a year, your employer does not have to contribute, but can choose to do so.

Please note the earnings figure listed above (£5,564 a year) may change each April. If it does, this web page will be updated. These earnings figure applies however regularly you get paid, for example, daily, weekly, monthly, or four weekly.

Special circumstances and how your situation affects your workplace pension

Your enrolment into a workplace pension may be different depending on your employment circumstances. See 'Special circumstances and your workplace pension' to see some examples.

Your age and how much you earn affect whether you’ll be automatically enrolled into a pension at work. See 'How your situation affects your workplace pension' to see some examples.

How safe are pensions

If you’re not sure how safe your pension is, find out more.

Opting out of your pension

If you decide that this pension isn’t right for you, find out what you need to do.

Additional links

Being enrolled into a workplace pension

Starting from October 2012, millions of workers will be enrolled into a workplace pension

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