More than eight million employees have started enjoying the benefits of workplace pensions since automatic enrolment was introduced five years ago in 2012.
These findings from The Pensions Regulator come as thousands of smaller employers set to enrol staff in the coming months.
But there is still a lot of confusion about how workplace pensions work and the benefits of signing up.
Here we answer eight questions about automatic enrolment, so you can make an informed decision about saving for your pension.
What are the benefits of the workplace pension?
Paying into a workplace pension is one of the easiest ways to start saving for your retirement.
In the past, employees had to take steps to join a workplace pension. With automatic enrolment, most are signed up straight away and have to make the effort to opt out if they no longer want to pay in.
One of the main perks is that it is not just you paying into the pension fund. Your employer pays into it as well and you get tax relief from the government.
An added advantage is the money comes out of your pay cheque so it's already taken care of when your salary goes into the bank. This means paying into your pension becomes a regular expense, like tax, National Insurance or student loan.
Will I be automatically enrolled?
If you work full or part-time in the UK, earn more than £10,000 a year, are over 22, but below state pension age and are not already paying into a workplace pension, you will be automatically enrolled.
If you earn less than £10,000, you can still opt in to a workplace pension with all its benefits, but you will not be automatically enrolled.
Does my employer have to offer a workplace pension?
By 2018, all employers will have to automatically enrol their eligible workers into a workplace pension.
The automatic-enrolment process started in 2012 with the largest companies. The only ones that might not be offering it now are new employers who set up their PAYE scheme in April 2014 or later. These companies will start their Automatic Enrolment duties between now and February 2018.
Is the workplace pension right for me?
Short answer, probably yes.
It's the easiest and most efficient way of starting to save for your retirement. It's also a flexible option, as it allows you to change how much you pay in depending on your budget, although there is a set minimum contribution. If you're already paying into a private pension, it might be worth paying into a workplace pension instead (or as well) as you get the added benefits of employer contributions and tax relief.
However, paying into a workplace pension might not be a good idea if you're:
- Struggling with debts. You should think about paying these off before saving for retirement.
- Close to retirement age. The benefits and likely impact on your retirement fund get smaller if you're due to retire soon.
How can I start paying into a workplace pension?
Your HR department should be able to help you enrol if it hasn't already happened automatically.
If you are automatically enrolled, you will start paying into your workplace pension straight away. This will be at the minimum level, which is currently 0.8% of your earnings.
You can easily increase this amount by contacting the pensions administrator in your company.
How much can I pay into a workplace pension?
At the moment the minimum contribution is 2% overall, breaking down as 0.8% from you, 1% from your employer and 0.2% as tax relief from the government.
From April 2018, this is increasing to 5% overall, with 2.4% coming from you, 2% from your employer and 0.6% as tax relief.
In April 2019, it goes up again to 8%, with 4% from you, 3% from your employer and 1% as tax relief.
What happens when I change jobs?
Most of us will work several different jobs during our lifetime, so it's important to know what happens to your workplace pension when you change employer.
If you leave a company you have two options. Leave the pension where it is and claim it when you retire, or move it to a new scheme.
Talk to your pensions administrator to find out more about your options and any fees and charges involved.
What if I'm self-employed?
If you're self-employed, or if you work for someone else on a self-employed basis, there are no workplace pension responsibilities.
However, saving for your retirement is very important, so you should look into paying into a personal pension.
This article is provided by the Money Advice Service.