6 important questions to ask your employer about your workplace pension

Your workplace pension is an important part of your long-term financial security, yet many employees don’t fully understand the ins and outs of their schemes.

By asking your employer a few key questions, you could ensure you’re taking full advantage of everything they have to offer and can make informed decisions that align with your retirement goals.

From maximising employer contributions to understanding ethical investment options, clarity and knowledge will be your strongest allies.

With that in mind, here are six questions you may want to ask your employer, whether you’ve been working for them for two years or 10.

1. How much am I contributing?

A key part of understanding your pension begins with knowing the percentage of your salary you’re contributing each month. Since it’s likely taken off before the money ever hits your account, you probably don’t even miss it.

While the current UK minimum auto-enrolment contributions are 5% for employees and 3% for employers, you are free to contribute more of your earnings to your pension fund. Just keep the pension Annual Allowance in mind, which is the maximum you can tax-efficiently contribute to your pot each tax year.

Furthermore, many businesses offer enhanced schemes, such as matched contributions. For example, your employer may offer a 6% match if you agree to a 6% contribution. This has the opportunity to significantly boost your retirement savings.

Don’t hesitate to enquire about any enhanced contribution options beyond the minimum, as maximising these can substantially affect your final retirement fund. For example, some employers might match your 5% contributions entirely or be open to negotiations.

2. Is my pension a defined contribution or defined benefit scheme?

Understanding the type of pension scheme you’re enrolled in is vital if you want to make the most of its potential. It’s also important to be aware of its limitations.

• Defined benefit (DB) schemes, though less common now, provide a guaranteed retirement income, based on factors such as your salary, years of service, and more. This can offer security and predictability, but they often lack flexibility.
• Defined contribution (DC) schemes involve contributions from both you and your employer, which are then invested in various funds by a pension provider or a financial adviser. These schemes can offer greater flexibility, particularly in how you access your funds. However, your pot is finite and won’t necessarily pay a guaranteed income for life.

Knowing which scheme you’re in allows you to assess the risks and compare them to the potential rewards, meaning you can make informed decisions about your retirement.

3. Is my pension contribution salary sacrifice, net pay, or relief at source?

The method by which your pension contributions are processed can have various tax implications.

• Salary sacrifice, for example, reduces your gross salary, potentially lowering your National Insurance (NI) and Income Tax payments. You are inherently earning less, but in exchange for a non-cash benefit – in this case, pension contributions.
• Net pay arrangements mean that your employer takes your contributions from your pay before it’s taxed. This may seem the same as salary sacrifice, but it’s not quite. With salary sacrifice, your actual income is reduced, whereas in a net pay arrangement, your contributions are simply taken off before tax.
• Relief at source sees you receive tax relief on contributions made into your pension at your marginal rate of Income Tax. The 20% basic rate is applied automatically, while higher- and additional-rate taxpayers must claim additional tax relief through self-assessment. Failing to do so can result in missing out on a substantial boost to your pension pot.

It’s essential to understand your scheme’s arrangement to make the most of your retirement savings and boost your tax planning potential.

4. Will you match my contributions if I increase them?

As discussed earlier, negotiating increased employer contributions can significantly enhance your retirement savings, and many employers are willing to match higher contributions to attract and retain talent.

Additionally, be sure to ask about bonus sacrifice, a strategy that allows you to contribute all or some of your bonus into your pension.

Read more: Not sure what to do with your bonus? Here are 5 actionable tips

Remember, maximising employer contributions could allow you to build a larger pension fund without needing an increase in your net pay.

5. How will my money be invested?

The particular investment strategy of your pension fund plays a crucial role in its potential growth. To understand how your money is being invested, you should be able to request details about the specific funds your pension is invested in from the provider, or your financial planner. This could help you understand the various risk levels and potential returns.

More than that, employees are becoming increasingly concerned about the ethical implications of their investments. You can ask if your pension scheme offers sustainable or ESG-related investment options. Or, a bespoke option from a financial planner can help you find the right investments for you.

Keep in mind that it’s important to find a good balance and understand the potential pros and cons of different types of investment strategies.

6. Are there any additional benefits to my pension scheme?

Beyond investing your pension wealth and keeping it safe until retirement, many schemes offer additional benefits that could be valuable in retirement. They may include life insurance, critical illness cover, or other forms of protection, offering financial security to your family in the case of unforeseen events.

It’s important to thoroughly review all the benefits offered by your pension scheme to ensure you’re able to make informed decisions about your retirement.

Get in touch

Actively engaging with your workplace pension is a vital step towards securing your financial future, but it’s not the only one you can take.

If you’re looking for more advice about pensions and how to maximise your contributions, I’m here to help.

Email Marnel.Stafford@fosterdenovo.com or call 07305 970959 or 0207 469 2800 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits.

Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement.