Pension assets are usually built up throughout a person’s working life, with workplace pensions being a key tool for this. These pensions are arranged and set up by an employer and a percentage of an employee’s pay is automatically put into the scheme every month.
In most cases, the employer will also add to the scheme and the government may also provide tax relief on the contributions.
Currently, UK law allows workplace pensions to be paid overseas and the DWP has recently addressed how Brexit will impact these schemes as the UK leaves the EU.
The DWP detailed on December 31 that the government does not expect the current rules to change as the UK leaves the union.
It advises any concerned retirees to contact their pension providers for further clarity.
READ MORE: State pension: Full details on all the changes arriving in 2021
If the actual pension provider goes bust, retirees should be able to get compensation from the Financial Services Compensation Scheme (FSCS).
Some of these DC schemes may be run by a trust appointed by the employer, which are known as “trust-based schemes.”
Holders of these schemes should still get their pension if the employer goes out of business but they may not get as much because the scheme’s running costs will be paid by members’ pension pots instead of the employer.
Defined benefit pension schemes
Defined benefit (DB) schemes are rarer to come by in modern workplaces but where they do still exist, the employer will be responsible for making sure there’s enough money in the DB scheme to pay each member their promised amounts.
Currently, the vast majority of UK workers will be impacted by any changes to workplace pension schemes as all employers must provide them under automatic enrolment rules.
Employers must automatically enrol workers into a pension scheme and make contributions so long as all of the following apply:
- the person is officially classed as a worker
- they’re ages between 22 and state pension age
- they earn at least £10,000 per year
- they’re usually based in the UK