5 questions to ask a prospective employer about your workplace pension

Group of Architects working in modern start up office

Retirement. You’ve probably thought about it, but have you considered how you might pay for it? While it might seem a long way off for many of us, thinking about your retirement income early is essential. Retirement might conjure up ideas of beachside holidays, carefree living and disposable income, but realistically, today’s youth will have to work much longer than they may expect.

The question is, when work eventually stops, where does the money come from?

Realistically, if you don’t have a workplace pension, and aren’t paying into a private pension pot, you might have to pray for a lottery win if you plan on enjoying your retirement. (And, odds are, you aren’t going to win.)

When you’re applying for a new role, do you focus your attention just on the salary? Perhaps the holiday benefits are a consideration? Or maybe, it’s all about career progression. Regardless of what attracted to you to the position, in all likelihood, it won’t have been the pension package.

Quite simply, pensions aren’t at the forefront of most people’s minds when applying for a new job - but they really should be.

The question is, what should you be considering?

  • How much will the employer pay into your pension?

The minimum total contributions under automatic enrolment have been set down by the Government and are set to increase between now and April 2019. You can find more about the specific figures from the Pensions Advisory Service. However, it may be the case that your employer will pay more than the statutory minimum.

This is something that you definitely want to know.

  • Will the employer match your pension contributions?

It may be the case that instead of simply paying a minimum contribution, your employer may agree to pay more into your pension pot, if you agree to save more too. This is known as ‘contribution matching’ and will significantly help you add to your retirement income.

It’s all about the long-game.

  •  Is there a limit on the level of employer contributions?

Most employers will have a limit to the percentage of your contributions that they’ll match. This will depend specifically on their scheme and contract. These should be sent to you along with your offer letter, but if not, feel free to ask.

You’re entitled to do so.

  •  Do you have to make contributions to get the employer contribution?

The amount you must contribute to the pension scheme is determined by the scheme’s rules, however, there’s a minimum amount that your employer has to contribute and they may well contribute more than they have to.

Don’t forget to ask them.

  •  What happens if you opt-out of the pension scheme, is the employer contribution lost?

Firstly, we would never advocate opting out of your workplace pension scheme. If you do decide to opt out, it’s very likely that you’ll lose out of the employer contribution and will have to rely on personal investments and the State Pension come retirement.

Opting out is basically saying no to free money from both your employer and the Government.

The Job Hunt: Don’t forget about the fine print

While pensions form a key part of people’s compensation package, often they’re missing from the job ad. Adverts really should provide employers with an additional platform to promote and publicise their best assets – a workplace pension scheme hopefully being one of them – but it’s often a missed opportunity.

In simple terms, the two most important factors in saving for retirement are how much you save and how long you save for. It’s never too early to start saving, but if you don’t save enough, or you start too late, retirement might be more of a struggle that you might anticipate.

Despite 59% of us expecting at least half of our retirement income to be made up of a private pension, the reality is that more than half of us will be primarily reliant on the state pension because we haven’t saved enough into a private or workplace pension. (Aegon Readiness Report 2016)

Searching and applying for a new job is always a bit stressful. Don’t be shy to ask about the benefits associated with a role – however, deciding on when to ask this question is up to you.

Don’t forget, as with all investing, your capital is at risk. The value of your workplace pension, regardless of supplier, could go down as well as up depending on the market and you may get back less than you invested.

To find out more about your options and help with your financial decisions, we recommend that you seek advice from a financial adviser. You can find one in your area at unbiased.co.uk