UK Occupational Pension Guide
Occupational pensions are run on behalf of employees of a company to provide them with life insurance and pension services. They provide for the well-being of the employee after retirement and also for dependants in case of the death of the employee.
Occupational pension schemes can be contributory or non-contributory. Contributory pensions schemes are where you make payments based on a percentage of your gross pay i.e. 5%, and your employer also makes a contribution. Non-contributory is when you don't make any contributions yourself- they all come from your employer.
Either way, by law the employer must bear the costs of administering the scheme.
They can also be either 'final salary' or 'money purchase'. With a final salary scheme, the pension is calculated as a percentage of the employee's salary close to retirement time. The length of time spent working for the company is also taken into account.
In money purchase schemes, the amount of pension is entirely based on the total amount paid by the employee into the pension, and any accumulated interest/dividend income associated with that amount.
We would certainly recommend joining an occupational pension scheme if offered to you. Declining it is like saying no to a wage rise. Obviously no-one likes the short-term effect of monthly deductions. But it is a fantastic way of saving that beats most other methods when looking at all the eventual benefits and tax advantages. They are usually a better deal than a normal pension scheme.
Having said that you don't have to join. Also if you do join, you can leave the occupational pension scheme anytime you like. But think twice before declining to join or leaving. Also you may not be allowed to rejoin once leaving.
If you have one already but are concerned that it is not good enough and want to save more then you can increase this e.g. by making Additional Voluntary Contributions.
