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Workplace pensions play a crucial role in helping you plan for your future, but what exactly are they, and how do they work?
What Is It?
A workplace pension is a retirement savings plan arranged by your employer. It’s a way to save consistently throughout your working life, so you have an additional income alongside the State Pension when you retire. Most workplace pensions today are what’s known as Defined Contribution schemes. Here’s how they work:
- Employee & Employer Contributions: Every month, you and your employer pay a percentage of your earnings into your pension. This combined contribution forms the foundation of your future retirement income.
- Investment: The money in your pension isn’t just sitting still - it’s invested in a range of funds and assets, with the goal of growing over time. Thanks to compound interest, your savings can build more quickly than you might expect.
- Retirement Income: When you reach retirement age, you can access your pension savings - usually from age 55 (rising to 57 in 2028) - so that you can enjoy your golden years and have the life you deserve after your career has come to an end.
Who Is Entitled to a Workplace Pension?
You’ll be automatically enrolled in a workplace pension if you meet the criteria set by the government. You’re classed as an “eligible employee” if you are aged 22 or over, are under State Pension age, earn more than £10,000 a year, and work in the UK. Since 2012, UK employers have been required to automatically enrol eligible employees into a pension scheme - a process known as auto-enrolment. If you’ve changed jobs a few times, there’s a good chance you already have multiple workplace pensions sitting with different providers. In fact, in the UK now there is an estimated £20 - £50 Billion sitting in lost pensions, but don’t worry, you can find and combine them with Compound so you have full visibility of the money you worked hard to save.
Why It Matters
For many people, including myself at the beginning of my career, the pension line on their payslip feels like money disappearing. It can feel quite distant, technical, or hard to get excited about. But in reality, your workplace pension is one of the most powerful financial tools you have. It’s a safety net quietly building in the background, growing every month to support your future self.
What makes it even better is that it’s not just your money going in. Your employer adds to it too, essentially giving you free money on top of your salary. And the government helps out as well, through tax relief, which boosts your contributions even further.
All of this adds up. Every monthly contribution, every employer top-up, and every bit of growth compounded over time can make a huge difference to your financial freedom later in life. Your pension isn’t just a deduction it’s potentially a big pot of gold sat there waiting for you.
Stay Informed
We’re here to make workplace pensions simple, transparent, and empowering. Subscribe to our blog to stay updated with insights, tips, and news on how Compound is helping people make the most of their pension savings. And if you have any questions about pensions, feel free to email us at hello@compoundapp.co.uk.
Important information
The value of your pension can go down as well as up, and you may get back less than you invest. This content is for general information only and should not be taken as financial advice. Tax treatment depends on your individual circumstances and may change in the future.
