Help and support
FAQs for Members
Different types of pension FAQs
You’ve been auto enrolled into your workplace pension scheme. Auto enrolment is a UK government initiative to help more people save for their retirement in a workplace pension scheme, with their employer’s help.
Your employer has chosen the NOW: Pensions Trust (the ‘Scheme’) as your workplace pension scheme.
Here’s a summary of how it works.
- Your employer puts you into the Scheme.
- You pay contributions to build up pension savings.
- Your employer pays contributions too.
- If you pay tax, you get tax relief on your pension contributions.
- Your pension savings are invested to help them grow.
- At any time from age 55 onwards you can use the savings you’ve built up in the Scheme to provide retirement benefits.
You’ll be able to manage your Scheme membership and monitor your pension savings securely through your own online account. You’ll get an email with details of how to log in.
You can opt out of being auto enrolled. Your enrolment email will explain how to do this. But, if you opt out, you won’t build up any pension savings with your employer’s help. See the Stopping Contributions FAQ section for more about this.
A master trust is a type of defined contribution (DC) pension scheme that lots of different employers take part in. Each employer has its own section. (There are some similar defined benefit (DB) schemes, but they’re not legally master trusts.)
Master trusts are managed by a single trustee that makes decisions on behalf of all the members of the scheme. A trustee is a person or organisation that holds and controls money or assets on behalf of, and for the benefit of, someone else.
Master trusts enable employers and members to benefit from lower running costs (because the costs of services and fees are shared between larger number of employers and members) while still having the strong governance of a trustee.
Our Scheme is a master trust. Our trustee, the NOW: Pensions Trustee Limited, has a board of trustee directors who share responsibility for ensuring the Scheme is always run in the best interests of you, the members.
We have been formally authorised and regulated as a master trust by The Pensions Regulator (TPR) since September 2019.
We’re one of 38 master trusts approved and continuously supervised by TPR to increase the quality of master trust providers in the UK. This means better protection for you and your pension savings. You can see a list of approved master trusts on their website.
In a defined benefit (DB) pension, you build up an amount of pension each year based on:
- part of your salary, and
- the number of years you build up the pension.
It’s fairly easy to estimate how much DB pension you’ll get when you retire. For example:
- your pension builds up at 1/60th of your salary each year
- the salary used to work out the pension is £12,000 a year
- you build up pension for 10 years.
Your DB pension would be: 1/60 x 12,000 x 10 = £2,000 a year.
Different types of DB pension include:
- final salary, where your pension is based on your salary near the date you retire or stop building up the pension, and
- career average, based on your average salary during your working life.
At one time most workplace pensions were DB, but they have increasingly fallen out of favour. They’re high-risk and expensive for employers. Employers are responsible for making sure there’s enough money to pay the promised amount of pensions to the members for the rest of their lives – and people are living longer, so the pensions have to be paid for longer. So the costs keep going up.
As a result, there are very few DB schemes open for building up future benefits. They’re almost all closed and are only promising to pay the benefits built up to the closing date.
In a defined contribution (DC) pension scheme, you build up pension savings that you use to provide an income when you retire. Your pension savings build up based on:
- contributions from you (and your employer if you’re in a workplace scheme), and
- returns on your investments.
Our Scheme is a workplace DC pension.
The value of your pension savings in a DC scheme depends on things like:
- how much has been paid in
- how the money has been invested
- when you decide to take your pension savings.
DC pensions are sometimes known as money purchase pensions.
In a DC pension scheme, even if your employer pays contributions, the amount of money you have at retirement will depend on how much was paid in and how the investments have performed. The amount of pension you receive is not guaranteed, so it is up to you to make sure you’ve got enough money to give you the kind of retirement you want.
This is a pension the government pays you when you reach your State Pension age. You build up State Pension by paying National Insurance contributions or receiving National Insurance credits (paid to carers, jobseekers and people on some family and sickness benefits).
The full State Pension rate for 2021 to 2022 is £179.60 a week. You need 35 qualifying years, when you paid full-rate National Insurance contributions or received National Insurance credits, to receive the full State Pension. If you have fewer than 35 qualifying years you’ll get a lower amount of State Pension.
You can apply for a State Pension forecast to see how much your State Pension might be. You can also check your State Pension age.
If your State Pension forecast shows you might not get the full amount, check your National Insurance contribution record. You may be able to pay extra National Insurance contributions to get a higher amount of State Pension.
There’s more information about the State Pension on the government’s gov.uk website.
A personal pension is a pension you buy for your own use. All personal pensions are defined contribution (also known as ‘DC’ – see What types of pension are there?). Stakeholder pensions, which have low charges and a default investment option, can be used as personal pensions. There are also Self-invested Personal Pensions (SIPPs), which offer a wide range of investment choices but tend to have higher charges.
A workplace pension is a pension offered by an employer for employees to build up pension savings. It can be a defined benefit (DB) or defined contribution (DC) pension (see What types of pension are there?).
At the highest level, pension benefits build up in two ways: defined contribution (DC) pensions and defined benefit (DB) pensions.
|DB pensions build up based on: a part of your salary, andthe number of years you build up the pension. Over the years your employer builds up a pot of money they use to pay the pension you’ve been promised. See What is a defined benefit pension scheme?||DC pensions build up based on: contributions – from you and your employer, if you’re in a workplace scheme, andreturns on the investments you choose. Over the years you build up a pot of money to use for retirement income. See What is a defined contribution pension scheme?|
|Some pension schemes provide both types of benefits. These are known as ‘hybrid’ schemes.|
Then there are workplace pensions, personal pensions and the State Pension.