Occupational Pensions

Occupational pensions are pension schemes made available to you through your employer. It may be a scheme set up through the company itself, or a personal pension scheme that your employer recommends. Some employers choose to set up a Group Personal Pension or GPP for their employees. This works in the same ways as a regular personal pension (see Personal Pensions), but usually offers employer contributions and lower fund-management fees. For more information on GPPs, see Group Personal Pension Schemes (GPP). Aside from GPPs, there are two main types of occupational pension scheme: the defined contribution scheme (see Occupational defined contribution schemes) and the defined benefit scheme (see Occupational defined benefit schemes). Defined contribution schemes are also called money purchase schemes; these are schemes where the amount that you contribute is defined, but the amount of pension that you will receive is unknown until you reach retirement. Defined benefit schemes are pension schemes which offer savers a defined amount of pension when they reach retirement age, perhaps based on their average salary over the years they have worked for the employer. You may also be offered a lump sum on retirement, see Can I take a tax-free lump sum on retirement? for details.

Occupational pension schemes are a good way to save for retirement, since your employer will generally contribute to your pension fund and you can build up retirement income in addition to your State Pension. However, remember that these schemes are long-term investments and you may not be able to access your pension fund until retirement age. If you are worried about needing the option of accessing your savings in an emergency, you should seek financial advice from your local Citizens Advice Bureau.

Occupational pensions often offer savers advantageous extras not found in other pension schemes. You may, for example, be offered a pension even if forced to retire before the agreed retirement age due to illness or disabilities, or a pension and /or lump sum paid to your surviving dependants in the event of your death. For information on the specialised pension schemes offered, see Specialised occupational pension schemes.