A pension is essentially a pot of money set aside for you when you retire. It serves as a retirement fund built up over the course of your working life through regular contributions, which are typically invested to grow your savings over time. Unlike other long-term savings, pensions come with the added benefit of tax relief.

Auto-enrolment is a process where you are automatically signed up for a workplace pension. This initiative, introduced under the Pensions Act 2008, requires employers in the UK to enroll eligible staff in a pension scheme and contribute towards it.

You can start receiving payments from your pension fund when you are at least 55 years old, although the state pension age is currently 66 (for both men and women) and is scheduled to increase gradually from 2026.

There are four types of pensions available, and you may have more than one:

  • State Pension: A regular payment from the government when you reach state pension age.
  • Defined Contribution Pensions: These involve saving a portion of your wages into a workplace pension scheme with contributions from your employer (at least 8% of qualifying earnings).
  • Working Pensions: These schemes pay an income after retirement based on a percentage of your earnings, either from your final year of work or averaged over a longer period (such as three or five years).
  • Private or Personal Pensions: In addition to a workplace pension, you may choose to contribute to a private pension scheme to help maintain your standard of living after retirement.