Over nine million people are now saving for their retirement under the government's "Auto Enrolment" scheme through their employer.
Two decades ago, many peoples retirement savings were held within "final salary" schemes, which paid a retirement income calculated by the amount of income earned by the employee and their length of service among other factors.
However, these schemes became nonviable as employers struggled to pay the benefits that had originally been promised due to the changing financial climate.
New final salary schemes are now no longer provided by employers, with new pensions being contributory and market based.
The government identified that there was a significant "savings gap" in the UK and rules were introduced in order to make employee enrolment in company schemes mandatory in 2012.
Large companies were the first to be required to comply with the new rules, but eventually all employers will be included, no matter their size.
Currently, both employers and employees must each pay 1% of the employee's salary in to a pension, but this will rise from April 2018.
Employees can "opt out" of the scheme, but this option has not been widely taken up at this stage.
Once the minimum contribution rate increases, more employees could opt out.
The government has committed to a review of auto-enrolment and is expected to raise rates and potentially expand the scheme to workers under 22 and those who are self-employed.
Employer pensions can be quite basic schemes and the investments held within may not be suitable for your current needs and objectives. At Westminster Wealth Management, we can conduct a full review of your financial situation and ensure any pension policies you hold are suitable for your needs. Contact us today.
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Government pension rules mean 9 million now saving for the first time