Welcome to your workplace pension

Your employer has set up a pension plan with Royal London to help you save for your retirement.

Each time you save into your plan, so will your employer.

You'll also receive tax relief from the government.

This can help to boost your pension savings.

You can make single contributions into your plan at any time.

Any single contributions you make will benefit from tax relief, too.

You may be able to transfer pension savings from other pension plans.

This could make it easier for you to keep track of them.

We're customer owned, so when you join your plan, you'll become a member of Royal London and share in our success.

We'll aim to give your pension savings an extra boost by adding a share of profits to your plan each year.

So if we do well, so do you.

We've called this your ProfitShare.

Your pension savings are invested and aimed to grow.

You can stick with a planned default investment choice or choose your own investments.

Our investment options are reviewed by experts to make sure they meet their objectives.

This ongoing governance comes at no extra cost to you, and when you reach age 55 you can take your pension savings in a way that suits you.

Even if you're still working, speak to your employer to find out more.

How do workplace pensions work?

Your workplace pension is what’s called a defined contribution pension. These are pensions where a pot of money is built up by you, your employer and tax relief from the government and then you use that money to give you an income to live on when you retire but you can often take some money out before you stop working, if you want to, if you’ve reached the age where you can do that.  

What is pensions tax relief?

The easiest way to explain tax relief is with an example.  Let’s say you want to put £100 into your pension. If you are a basic rate tax payer, you only need to pay in £80, as the government will add £20. That’s called tax relief.

If you're a higher rate taxpayer, you’ll get tax relief at 40%.  If you do salary exchange you won’t need to do anything else and that £100 going into your pension will cost you £60. 

If you’ve chosen not to do salary exchange, you will have to claim back the difference between the 20% you get automatically and 40 or 45% tax via your self-assessment tax return.

How can I pay into my workplace pension and get tax relief?

There is a maximum amount that you can receive in tax relief. For most people this is their earnings.  So, if you earn £20,000 a year – the most that could be paid in by you and get tax relief is £20,000 a year.  The maximum is based on your earnings alone. But if someone isn’t working then they can still pay £2,880 a year into a pension and get 20% top up by way of tax relief to make the total that goes into your pension £3,600 a year. And anyone can have a pension, even children.  

What is salary exchange?

This can also be known as salary sacrifice.

You exchange some of your salary in return for your employer paying all of the pension contributions into your pension.  You’re then earning less salary which means there will be less national insurance to pay. More money will go into your pension but you will have the same money in the bank as before.

You can also chose for the same amount to go into your pension as before which would mean more take home pay. 

Salary exchange does involve a change to your contract and the change has to apply for 12 months. For the majority of people salary exchange is a good thing and your employer will keep you right about the circumstances where it might not be a good idea – for example you can’t use salary exchange if it will take you below minimum wage.  

What is a pension transfer?

You might have had a few different jobs with pensions and you might be wondering about consolidating those pensions. Taking advice on this is important.  But in terms of pros and cons for transferring, there are a few to consider:  

The first is charges. It may be worth consolidating your pensions to one that has lower charges. But the cheapest isn’t necessarily the best, you may be paying a bit extra for features that are important to you.  

Secondly, fund choice. Most pension schemes have a number of investment funds that you can choose from, but some may have a wider range and others may have a focus on, for example, responsible investment which may be important to you.  

The last reason why you might want to combine your pensions is if one or more of your pensions has restricted options in terms of what you can do with your money when you retire. So, for example, you may have to take all your money out in one go, or you may not be able to go into what’s called drawdown.  

It is important to say that there’s no guarantee that combining your pensions will mean they do any better than if you left them where they were. And in some cases, it may be a bad idea, particularly if you have older pensions, that may have valuable features, such as guaranteed annuity rates or values. 

If you have worked in the public sector like the NHS or teaching, in the past then you can’t transfer your pension.

How are pensions invested?

The money that you pay into your pension, and money that your employer contributes on your behalf, along with the government tax-top up, is invested.

That means it goes into investment funds which themselves invest in things like companies, by buying shares in them or by loaning them money, and other assets such as government debt – often called government bonds, or gilts, if it’s UK government bonds - and sometimes commercial property as well, which could be anything from an office block to a shopping centre.  

Unless you actively decide where to invest your pension contributions, they will be put into a default fund.  

A default fund must meet the needs of most of the members of the workplace pension scheme.  The vast majority of workplace pension scheme members have their money invested in the default fund. If you’re happy to have your money there, then you don’t need to do anything. But you don’t have to keep your money there. 

You can switch your money to other funds. You might want to invest in a fund that aligns with your beliefs or principles for example investing in sustainable funds. Or you might want to take more or less risk.

If you want to move your pension money to riskier funds, you have to be comfortable with your pension funds falling in value, sometimes sharply – because – put simply – riskier funds are more volatile. The hope is that over time, the ups and downs smooth out and you have more ups than downs, and that you generate a bigger return than if you’d kept your money in the default fund. But there’s absolutely no guarantee that this will be the case and – as with all investments – you could get back less than you paid in.

Whether you move your pension money from the default fund and, if so, which fund or funds you move it to is the kind of decision that a financial adviser can help you make.