Every payday, a percentage of the employee’s pay is deducted automatically from their salary or wages and invested in the scheme. The employer also contributes to the scheme on the employee’s behalf as does the government in the form of tax relief.
In a ‘defined contribution scheme’, the employee’s retirement income is based on the contributions made, whereas in a defined benefit scheme, the employee’s pension income is based on his or her salary and length of service with the employer. Most occupational pension schemes are defined contribution schemes.
Most defined contribution schemes are managed by insurance companies not the employer, so employees’ pension pots should not be affected. If the scheme is a trust-based scheme, employees will still get their pensions, although not as much because the scheme’s running costs will be paid out of members’ pension pots rather than by the employer.
Under ‘Automatic enrolment’ rules, any employer (with at least one member of staff) must automatically enrol every employee between the age of 22 and State Pension age and earning in excess of £10,000 a year (2022/23) into a ‘Workplace pension scheme’.
The minimum contribution for employers is 3% of the employee’s earnings, whilst employees are obliged to contribute at least 4% or 5% of their earnings before tax, depending on the scheme criteria.
THE PENSIONS REGULATOR IS THE STATUTORY REGULATOR FOR WORKPLACE PENSIONS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE AUTO ENROLMENT AND OCCUPATIONAL PENSIONS.
A DEFINED CONTRIBUTION PENSION IS A LONG TERM INVESTMENT, THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.
Trafalgar International fully advised on, and managed the transfer of my UK held private pensions into QROPS.
Over a number of one to one personal meetings I received advice outlining the process and advantages of QROPS for someone living outside of the UK.
All my questions were answered and clarification provided when requested.
I have been very pleased with the service provided by Trafalgar International.
My husband and I have become fond of our adviser at Trafalgar International thanks to his untiring efforts with our financial.
They are trustworthy and honest and always gives us a thorough and professional service.
I would happily recommend Trafalgar International to anyone seeking financial advice.
Trafalgar International have been our Financial planners for some time and has always given a good service.
They always seems to have time for us and are both good at their job and a pleasure to deal with.
As professional financial advisers we can help you make informed decisions about your financial future, short, medium and long term.
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