Life can get busy, and whether you’re approaching retirement or this is some way off, pension planning may not be top of your to-do list. Yet, the sooner you take control of your savings and investments, the more time you’ll have to accumulate the wealth you need in later life.
If you’re eligible for automatic enrolment, your employer must add you to a workplace pension scheme and make contributions on your behalf. You could also benefit from tax relief of 20% to 45% (the amount is determined by how much Income Tax you pay) on qualifying contributions until you turn 75.
Yet, according to the Actuarial Post, 1 in 6 UK employees with a workplace pension have never checked how much they have in their pot. Moreover, 1 in 8 workers don’t know if they are enrolled on a pension scheme by their employer or how much their contributions are.
This may be due in part to a lack of communication from employers. Recent research published by IFA Magazine found that 1 in 4 over-40-year-olds who are still working said their employer does not provide adequate information about their pension.
Keep reading to discover four key questions to ask about your workplace pension so that you can make informed decisions about your retirement funds.
1. What type of pension scheme am I enrolled in?
The type of pension you have determines:
- How your funds are managed
- The level of risk involved
- What benefits you can expect to receive.
As such, finding out whether you have a defined contribution (DC) pension, or a defined benefit (DB) pension is crucial for effective retirement planning.
Defined contribution pensions
A DC or “money purchase” pension is the most common type of workplace scheme, especially in the private sector. Each month, you and your employer will contribute to your pot. You can opt out and take the funds as part of your salary instead, but this is not normally advisable.
Your pension contributions are invested and the amount you receive during retirement will depend on:
- How much you and your employer have paid in
- How well the scheme’s investments have performed
- Fees and charges deducted by the pension provider.
Since the Pension Freedoms legislation was introduced in 2012, you have considerable flexibility in how you draw an income from your DC pension – which you can usually do from 55 (rising to 57 from April 2028).
You might choose to buy an annuity that provides a regular income for life or to make flexible withdrawals as you need them (leaving the remainder of your pot invested).
Defined benefit pension
DB or “final salary” pensions are much less common than they used to be. However, if you currently or previously worked for a large employer or in the public sector, you might belong to one of these schemes.
The final value of your pot will be determined by:
- Your final (or average) salary
- How long you belonged to the scheme.
Unlike a DC pension, a DB pension usually provides a guaranteed income for life (after 55, rising to 57 from April 2028). Moreover, this type of scheme often provides additional benefits, such as death in service payouts.
2. How much will you contribute to my pension?
If you’re eligible for auto-enrolment, the minimum total pension contribution is 8% of an employee’s qualifying earnings, with the employer paying at least 3%.
It’s important to ask how much your employer is contributing, as you’ll need to make the total up to 8%. So, if your employer contributes the minimum amount of 3%, you’ll pay 5%. On the other hand, if your employer pays 5%, you’ll only need to pay 3%.
However, you might find that 8% of your pensionable earnings isn’t enough for you to build the wealth you need for your desired retirement age and lifestyle. If so, it’s worth identifying alternative income streams – for example, from other savings and investments – or considering increasing your monthly pension contributions.
3. Can I increase my contributions and if so, will you match this?
If you decide to increase your monthly pension contributions beyond the minimum amount required, it’s worth asking your employer if they’ll match your percentage increase.
Paying more into your pension each month could be an effective way to boost your retirement savings and reduce the risk of a financial shortfall later in life.
Particularly generous companies may offer “double matching”. This means that when you increase your contributions, your employer doubles up on this amount (up to a maximum that they set). For example, if you raise your payments to 5%, an employer who offers this benefit would increase their contributions to 10%.
4. Do you offer pension salary sacrifice?
Some employers allow you to contribute to your pension through a salary sacrifice scheme. In simple terms, this means that your salary is reduced by an agreed amount, which your employer pays directly into your pension.
While giving up some of your salary might not seem appealing, contributing to your pension through such a scheme could allow you to increase your take-home pay and grow your retirement savings tax-efficiently.
This is because a lower pre-tax salary will reduce the amount of Income Tax and National Insurance (NI) you and your employer pay.
If your employer doesn’t currently offer salary sacrifice, they may now be more open to doing so since employers’ NI contributions increased on 6 April 2025.
Get in touch
If you’d like help to review your pensions and check that your savings and investments are on track to provide the retirement you desire, we can help.
Please get in touch by emailing info@lloydosullivan.co.uk or call 020 8941 9779 to see how we can assist you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pension Regulator.
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.
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