How Pensions Work

Saving for the future

The main benefit of having a workplace pension is that not only do you contribute to your retirement fund - your employer does too.

Your contributions may also receive tax relief. So for a basic rate tax-payer, every £1 you contribute only costs 80p from your wage. If you do not pay income tax, you will be unable to benefit from this tax relief.

Your employer may have set minimum requirements for contributions but you can choose to save more than this, should you wish.

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Investing your money

Your pension savings are invested in a fund of your choice until you retire.

If you are a member, you can choose to invest in the default Target Date Funds (TDFs), or select your own funds. TDFs are suitable for anyone who does not want to make their own investment decisions.

Find out more

Retiring ComfortablyRetiring Comfortably

You can normally choose to retire at any time from age 55.

There are several retirement options available to you.

Read more about retirement options


DB and DC Schemes - What's the Difference?


Defined Benefit (DB) Pension Scheme:
The amount you get at retirement is based on a number of things such as your earnings and how long you have been a member of the pension scheme.

When you retire you can normally take up to 25% of the value of your benefits as a tax-free cash lump sum. The rest you get as a regular pension income, on which you might pay tax.


Defined Contribution (DC) Pension Scheme:
The contributions paid by you and your employer are invested in assets such as shares (a share is a stake in a company), bonds (a type of loan) and property. In some schemes you can choose how you want to invest your contributions, or you can use the default option where investment decisions are made for you.

The amount in your pension pot at retirement will depend on how much has been paid in and how well the investments have performed.

When you retire the following options are available:
1) Take up to 25% of your account as a tax-free cash lump sum, with the remaining fund used to purchase an annual income for life (also known as an annuity).

2) Take your whole account as a cash lump sum. If you do so, 25% can be taken as tax-free cash and the remaining 75% will be subject to income tax.

3) Or, you could utilise income drawdown through TPT's selected provider, or using your own independent Financial Adviser. As with the annuity service, our members can access income drawdown on an advised and a non advised basis. TPT was able to negotiate favourable terms for its members for this service.

4) You could consider other flexible retirement options, such as a series of lump sum payments. Each lump sum usually being 25% tax free and the remainder taxable at marginal rates. You will need to access these options through your own independent Financial Adviser. 

5) You can leave your account where it is until you decide you wish to access it.

Find your scheme

Looking for information about your scheme?

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