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21st November 2018
:: Scheme Member | Important Aspects of My Pension | Did I have to join my pension scheme? | Active members of a DB scheme

Did I have to join my pension scheme? – Active Members
This Quicknote is written for people who are active members of an employer’s pension scheme.  
 
Defined benefit schemes
 
The number of defined benefits schemes in the UK is declining. In a publication released by the Pensions Regulator and the Pension Protection Fund in December 2006, 58% of defined benefit schemes surveyed were closed to new members.*
 
Schemes open to new members made up just 31% of the 5,800 schemes surveyed. Of the total membership surveyed, representing around 12.6 million members: 
  • 26% were active members
  • 41% were preserved members
  • 33% were pensioner members.
More and more sponsoring employers are considering completely closing their defined benefit schemes on the grounds of increased cost and risk. Where a scheme does close this way, there would be no active members; only preserved members and pensioner members would remain.
 
If your employer has a defined benefit scheme that is not closed to new members you will normally have been invited to join. If membership was optional and you decided not to join, you should consider what alternatives are available.
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You are not usually obliged to join, but your employer may have automatically enrolled you into the pension scheme. Under these circumstances, if you don’t want to be a member of the scheme you would have to ‘opt-out’. Opting out is a big decision and not one that should be taken lightly. You may wish to consult a suitably qualified Financial Adviser experienced in defined benefit pension schemes for further advice.
 
Where membership of an occupational pension scheme has been offered to you, your employer or scheme should have provided you with, amongst other things, full details of the benefits available under the scheme and how much you are required to contribute (only very few schemes now don’t require YOU to pay).
 
If you have any questions or are unsure what to do, you should ask your employer or other pension scheme representative for more information, although they are usually unable to give you financial advice, unless regulated to do so.
 
Having decided to join the defined benefit pension scheme, you will normally have had to sign an application form which would also have given your employer authority to deduct your contributions from your wages.
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Money purchase schemes
 
Money purchase schemes are growing as an alternative to traditional defined benefits schemes.
 
You are not normally obliged to join a money purchase scheme, but your employer may have automatically enrolled you in the pension scheme. Under these circumstances, if you don’t want to be a member of the scheme you would have to ‘opt-out’. Most employees join simply to get the benefit of the employer’s contribution. You may wish to consult a suitably qualified Financial Adviser experienced in money purchase schemes for further advice.
 
Where membership of a money purchase scheme is offered to you, your employer or scheme should provide you with, amongst other things, full details of the scheme, the investment arrangements and choice of funds available, and the minimum amount you would need to contribute.
 
If you have any questions or are unsure what to do, you should ask your employer or other pension scheme representative for more information, although they are unable to give you financial advice. They are likely to have someone appointed to provide you with some investment guidance.
 
If you decided to join your employer’s money purchase scheme, you will normally have had to sign an application form which would also give your employer authority to deduct your contributions from your wages.
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What is a waiting period?
 
You may have been required to work for your employer for a specified period, before you were eligible to join the pension scheme (e.g. 12 months). This approach is often used by employers with defined benefit schemes where in the past there has been a high turnover of staff during the first few months of service.
 
For employers operating a money purchase scheme a high turnover of staff during the first few months of service leads to small investment ‘pots’ being left in the scheme and hence a waiting period is often used to avoid this.
 
During the waiting period, you would not usually have been eligible for any of the benefits offered by the pension scheme to its members (such as dependants’ pensions). However, you may have enjoyed death-in-service protection in the intervening period.
 
An employer may sometimes waive a waiting period for a key employee.
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Summary
 
People seldom have identical pensions and you should avoid drawing comparisons with colleagues whose circumstances may at first appear the same but could emerge as having significant differences.
 
This Quicknote forms part of our Module Important Aspects of My Pension and should be read alongside the other Factsheets and Quicknotes in the series.
 
This is not an authoritative document. Seek professional advice from an appropriately experienced and qualified adviser.
 
* Source: The Purple Book, December 2006, published by the Pensions Regulator and the Pension Protection Fund.
 
 
Did I have to join my pension scheme? v3.0 Active
Last updated 16/01/2007
 
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Glossary
View our Glossary for definitions of the terms used in our Factsheets
 

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Did I have to join my pension scheme? - Active Members
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