Occupational pensions

Many employers have an occupational pension scheme for their employees. This is sometimes called a company or ‘works’ pension. It may be:

• a salary-related scheme , which provides a pension that depends on the number of years you belong to the scheme and your earnings; or
• a money purchase scheme , which is a scheme where contributions are invested and then used to buy a pension when you retire.

You should ask your employer if they have an occupational pension scheme and what sort of scheme it is.

If you join your employer’s occupational scheme, usually both you and your employer pay money into the scheme. You will normally get tax relief on your contributions. Occupational pension schemes also provide other benefits, such as:

• a pension to your husband or wife when you die (and sometimes to your partner if you are not married); or
• a pension if you become ill or disabled and have to retire early.

Should I join my employer’s occupational pension scheme?

For people in work, occupational pensions are usually a very good way of saving for a second pension. But whether or not this type of pension arrangement is suitable for you will depend on your personal circumstances, such as your working patterns and your pay.

Most employers who provide occupational pension schemes contribute more to them than their employees, and some employers run schemes where you don’t have to pay any money at all. Employers must give you details about any scheme that you are eligible to join, and it is important that you check it out carefully when you are looking into your pension options. Most people who join an occupational pension scheme will be better off when they retire than if they had not joined it.

What if I work part time?

If you work part time and your employer has an occupational pension scheme, you should normally be allowed to join it.

If you want to know more about how occupational pension schemes work, please see Occupational pensions – Your guide (PM3).