Most occupational schemes provide a pension and tax-free lump sum for all the employees at retirement. A group of trustees selected by the employer are typically responsible for running the pension scheme and choosing the investments. Hence smaller firms don’t tend to opt for this route due to higher upfront costs.
The Occupational Pension Scheme’s main benefit is tax efficiency, both the employer and employees receive tax relief for contributing towards the scheme. Scheme contributions qualify for income tax relief and the investment itself will benefit from capital gains tax relief, as with all pensions.
For an employee leaving the company their contributions to the pot would cease, however they would be still entitled to their share of the pot after 55 years of age. Employees would typically also be able to withdraw 25% of their share of the funds as a tax-free lump sum. This is a feature of most pensions.
The employer may choose to match your contributions to the pension pot or contribute a staggered amount depending on their policies, workplace procedures and financial situation.
However, generally speaking, salary sacrifice (reducing salary to pay more into the pension pot) is a common method of increasing tax efficient contributions to the pension pot.
It is normally advisable for an employee to join their employers Occupational Pension Scheme as soon as possible in order to benefit from the employer contibutions.