Types of Pensions
There are three main types of non-State pension. They are:
- occupational salary-related schemes – offered by some employers;
- occupational defined contribution schemes (also called money purchase pensions) – offered by some employers; and
- stakeholder pensions and personal pensions – offered by some employers, or you can start one yourself. You may also be offered a group personal pension at work. These are also money purchase pensions.
Pensions at work
If you work for a business with fewer than five employees, your employer does not have to offer you access to a pension scheme. You should still check what’s available, as some small employers may offer a scheme anyway.
The government is planning changes that will mean all employers will have to offer and contribute to a pension in future. Employers who haven't offered an occupational pension in the past may set up their own scheme, or may pay pensions into a new central scheme that is being set up. The Pensions Advisory Service website has more information – see Related links.
What are the benefits?
Although you don’t have to join any pension scheme offered through your job, it’s usually a good idea to join an occupational pension scheme if it’s available because:
- your employer normally contributes; and
- often you also get other benefits, such as:
- life insurance which pays a lump sum and/or pension to your dependants if you die while still in service;
- a pension if you have to retire early because of ill-health; and
- pensions for your spouse and other dependants when you die.
Not all pensions offered by employers are occupational pensions. Your employer may offer a stakeholder pension or a personal pension through a group personal pension arrangement. These pensions are not called occupational pensions even though the employer may contribute.
Top tips
- Find out whether your employer offers a pension scheme, what type it is and when you can join it.
- Don't delay starting or joining a pension scheme – you could end up with a much smaller pension.