Auto-enrolment celebrates its 10th anniversary in October 2022. While the policy is, according to a government research paper from January, “widely agreed to have been a success,” questions remain about whether the current 8% minimum contribution is sufficient.

With millions of UK workers potentially sleepwalking into an underfunded retirement, making the most of your workplace pension is crucial.

Whether you’ve just started a new job or have been with your current company for many years, there’s always the possibility your workplace pension could be working harder for you.

Here are five questions to ask your employer now.

1. What type of pension scheme do I have?

The first question you’ll need to ask is what sort of scheme your employer offers. There are two main types.

A defined benefit (DB), or “final salary” pension, pays a regular income at retirement based on your final salary and your years of service with the company. They are often considered the “gold standard” in pensions thanks to the generous benefits they offer but fewer companies are now offering these.

Dependent on your employment sector, and how long you’ve been with the company you might be enrolled in a DB pension, so be sure to check.

More common, are defined contribution (DC), or “money purchase” plans. With this type of plan, you make monthly contributions to build a pension pot from which your retirement income can be drawn.

DC schemes allow you to access flexible options at retirement, under Pension Freedoms legislation.

2. Can I increase my contribution, and if so, will it be matched?

Under auto-enrolment rules for 2021/22, the minimum contribution is 8%, comprising 5% from you and a further 3% from your employer.

Depending on your level of disposable income, or when you started contributing to your pension, you might find that 8% is insufficient to provide the retirement lifestyle you want, at the time you want.

You can increase your contribution voluntarily but be sure to speak to your employer about increasing theirs too. Some employers might already be paying above the 3% as a staff incentive, while others might be willing to match any increase you make.

3. Can I opt for salary sacrifice?

Salary sacrifice allows you to reduce your salary and pay the reduction straight into your pension. This has tax benefits for you, as lowering your pre-tax salary means the amount of Income Tax and National Insurance (NI) you pay will decrease.

This could be especially important from April 2022 when the government’s 1.25 percentage point rise in NI – under the Health and Social Care Levy – kicks in. The currently frozen Personal Allowance means that salary sacrifice could make a huge difference to the Income Tax you pay over the next few years, potentially even preventing you from tipping over into a higher tax bracket.

Salary sacrifice is also great news for your employer. Employers also pay less employer National Insurance contributions (NICs) and might even use that saving as an additional employee incentive, further boosting your contributions.

However, bear in mind that reducing your salary could lower your borrowing potential when you come to take out a mortgage. It may also affect other benefits, such as any “death in service” payment.

4. Can I align my pension to my values on sustainability issues?

Sustainable, responsible, and ethical investments have all become more popular over recent years. If you have views on environmental, societal and governance (ESG) issues that you would like to be reflected in your choice of investment fund, speak to your employer.

Your values might mean that you don’t want to invest your money with a company that processes fossil fuels, has a bad record on human rights or lacks transparency.

The UK’s largest pension provider, Nest, allows its members to switch to its Ethical Investment Fund. Speak to your employer to see who your provider is and whether they offer a sustainable or responsible investing option.

5. Can I choose my own pension for employer contributions?

If you are already paying into a private pension, you might want your employer’s contribution to go directly to that pension instead.

Some employers will allow you to receive contributions directly into a pot you choose so be sure to ask the question.

Get in touch

If you would like help managing your workplace or private pension, or want to discuss any aspect of your long-term financial plans please get in touch and speak to us today.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.