Blog

Understanding pensions and the importance of having savings

  • Sarah Storey
  • 8th May 2019

Retirement seems so far away, so it’s understandable that saving for your pension might not be at the top of your to do list. And let’s face it, sorting out your pension can seem a little scary and tedious, but it’s actually really important. Plus saving for your pension now means that you won’t have to worry about it later.

Did you know that if you work for Syft you could be eligible for a workplace pension scheme, or could already be enrolled in one? Great news right? But what does it all mean? To help you get to grips with understanding pensions and the importance of saving money, we’ve put together a guide on everything you need to know, including:

  • What is a pension?
  • What is a workplace pension and how do they work?
  • Will I still get the state pension if I have a workplace pension scheme?
  • The advantages of having a pension scheme
  • How the Syft pension works
  • The importance of having savings

What is a pension?

A pension is a sum of money you’ll use to live on once you have retired from work.

What is a workplace pension and how do they work?

A workplace pension is a pension that’s arranged by your employer. A percentage of your pay is put into the pension scheme automatically every payday. If you meet certain criteria, your employer will also pay a percentage each month in to your pension. Think of it as a little pot of gold that you and your employer both contribute to.

Will I still get the state pension if I have a workplace pension scheme?

Saving into a workplace pension does not affect your entitlement to the State Pension. How much State Pension you qualify for is based on your National Insurance contributions record.

The advantages of having a workplace pension scheme

When you retire, your pension will become your income. If you never put any money aside for a pension you’ll still receive your state pension but it might be below what you are used to spending every month. Having a workplace pension scheme means you can live more comfortably in retirement. Let’s take a look at some of the other advantages of having a pension.

  • Provides you with an income for when you retire
  • Your employer will also make monthly contributions
  • You benefit from pension tax relief
  • You can decide where to invest your money or leave it to the experts
  • You can do what you want with the money when you retire

How does the Syft pension work

You will automatically be enrolled into a workplace pension with Syft if you meet the following criteria:

  • You earn over £192 per week (or £833 per month)
  • You are aged 22 or over
  • You are under state pension age

You can opt out of the pension scheme if you want to, but if you stay in you will have your own personal pension when you retire. Your pension will belong to you, even if you leave us in the future. Both you and we will pay contributions into it every pay period, and the government will also contribute through tax relief.

You will receive a starter pack of information from the pension scheme that will provide you with all the information you need. But just in case you have any questions, we’ve rounded up some of our most frequent FAQs.

Why have I been automatically enrolled into a pension?

All employers now have to put their workers into a pension scheme if they earn over £10,000 per year, are aged 22 or over and are under state pension age. This is the law, because the government wants to get more people to have another income in addition to the state pension when they retire.

What if I don’t want to join the pension scheme?

If you don’t want to join the scheme, you need to ‘opt out’. You can opt out in the one month period starting on either the date of this letter or the date you were put into the pension scheme, whichever is the latest. You can opt out by completing the form available from our pension provider (NEST) and following their instructions.

You will need to sign the form, or if you send it electronically it will need to include confirmation that you are submitting it personally.

The pension provider will also be able to tell you when the one month opt-out period started, if you aren’t sure.

If you opt out during this period any contributions to your pension you have already made will be refunded and you will not have become a member of the scheme on this occasion.

What if I opt out of the pension scheme but then change my mind in the future?

You can ask to rejoin the scheme by contacting us by letter. The letter has to be signed by you. Alternatively if you send it electronically, it has to contain the phrase, ‘I confirm I personally submitted this notice to join a workplace pension scheme.’

If you earn more than £116 a week (£503 a month) we will pay contributions into the pension scheme as well. You can only rejoin once in any 12 month period.

What happens after I opt out of the pension scheme?

Anyone who opts out or stops making contributions will be automatically enrolled back into a pension scheme at a later date (usually every three years if they meet certain criteria). This is because your circumstances may have changed and it may be the right time for you to start saving. We will contact you when this happens and you can opt out again if it’s still not right for you.

If I want to stay in the pension scheme do I have to pay in?

You will pay in 3% of your earnings each pay period. This will be taken directly from your pay and will include tax relief from the government. We will also pay in 2% of your earnings each pay period. Therefore, the total contribution to your pension pot will be 5% of your earnings

Will this amount change?

As your contribution is a percentage of your pay, the amounts will automatically go up or down if your earnings do. Also, we are going to increase the percentage being paid into your pension over the next year in line with the government’s minimum standards. From 6 April 2019, you will pay 5% and we will pay 3%.

The importance of having savings

Having a pension is important but so is having savings. Putting away a little bit of your wage each time you get paid means you’ve got money set aside for a luxury purchase like a holiday or an emergency bill like you car breaking down. If you start putting money into a savings account now you won’t have to worry about using your pension to pay for big expenses.

One way of earning some extra money is to get a temporary job with Syft. Syft offer higher wages as well as weekly pay, allowing you to manage and save your money. All you need to do is download the Syft app.

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