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Employees with existing personal pension schemes

24th Oct 2016

By 2018 all employers have to set up a workplace pension scheme and automatically enrol eligible employees.

If an employee already has a personal pension it may seem like a good idea to simply contribute to the existing scheme.  But you can’t do this under workplace pension rules.  You need to set up your own employer workplace pension scheme.

Personal pensions

If an employee already pays into a personal pension or has a pension from a previous employer he or she can continue to pay into that as well as contributing to the workplace pension.

But this arrangement is separate to the workplace pension.  As an employer your workplace pension contributions can’t be paid into the personal pension even if your employee asks you to.

Pension options

Employees with personal pensions have four options:

  1. Build up two pension pots by paying into their workplace pension as well as their personal pension
  2. Stop paying into the personal pension.  The pension fund will keep on growing but it may be affected by charges so your employee will need to speak to the pension company about this or an independent financial adviser.
  3. Transfer the personal pension pot into the workplace pension scheme.
  4. Opt out of the workplace pension scheme and continue to pay into the personal pension.  But this means your employee will miss out on contributions from you.

If your employees have any questions that you can’t answer suggest they look at the Money Advice Service website where there is a section on auto enrolment.

Want some help with your workplace pension?
Biznus Payroll can help you with your pension choices, pension set up and ongoing management.
Get in touch:
01373 228300