Your employer can use an existing pension scheme, so long as it meets the legal requirements, they don't need to create a new one to comply with the Law. If they haven't set up a scheme they have the option of engaging with a pension provider to set one up or contacting Your Island Pension (YIP) to set up a scheme with them.
Although there are lots of different pension providers, there are two types of pension schemes, and these are explained below. There is information that your employer will be required to obtain from the pension provider to confirm it complies with the Law and they will need to keep hold of those records so they can supply it to Revenue Service if they ask for it.
Defined contribution schemes
- The first, and most common type of pension scheme, is a defined contribution (DC) scheme, and this is where the pension contributions you and your employer pay are invested into individual pension pots. When you retire, the value of this pension pot is paid to you as a pension.
Defined benefit schemes
- The second is called a defined benefit (DB) Scheme, and this is a scheme where the pension contributions you and your employer pay are used to provide you with a certain amount of pension. Defined benefit schemes are unlikely to be used for secondary pensions, and you should contact your pension provider for details on these.
If your employer already provides a pension scheme they will need to check with the pension provider that it meets the legal requirements. If being in the pension scheme is part of your contract of employment there won't be anything else for you to do.
If your employer hasn't made the pension compulsory as part of your contract of employment and isn't using Your Island Pension (YIP), you will need to choose between the scheme they have set up and YIP.
Each pension arrangement will be different but there will usually be some paperwork for you to complete. This will give the pension provider details about you and, if the pension is a DC scheme, how you want your pension pot to be invested.
If your employer decides to postpone when they enrol you into the scheme, they will need to write to you to confirm this and the date when you will join the scheme. If you are a Designated Employee this is done using a Notice of Deferred Enrolment.
If you aren't sure what investment options are available to you or if you can make decisions about how your pension is invested, you should speak to the pension provider directly. Your employer is required to find a suitable pension scheme that offers a pension fund that meets the needs of most people, and normally this is where your money will be automatically invested.
