'Is your company offering money for a pension? TAKE IT TAKE IT TAKE IT!' discussion

LittleMax

graduate wrote: »

I recently had some free financial advise from an IFA and one of the things that we discussed was pensions. One of the things that she said was that by the time I reach retirement there is unlikely to be a state pension (I'm 23). Is she right?

I firmly believe there will be no automatic state pension when I reach retirement ... and I'm 38! I would stake all my pension fund on there being none when a 23 year old gets there

Glad I listened to the advice of my family and colleagues and started paying in as soon as I started full time work at 19. I can understand the people that say they need it to support their family, but if you had paid into the pension pot from day 1 when you had no dependants, you really wouldn't notice it.

NobbyC_2

If you can possibly afford it pay into a pension. I paid into my employer's pension fund, to which they contributed a considerable chunk, for 25 years and then left to work for myself. I crashed out but left the pension in which I later switched to an insurance company. I ended up with a fund of over £150,000 to buy an annuity. By using "Impaired life - I used to smoke and had a heart attack" just over two years ago I got a payment of nearly £15,000 as a tax free lump sum and a pension of just over £10,000 a year. My wife also has a small pension and with the state bit we get over £21,000 a year between us. She doesn't pay any tax and I pay only a little 'cos we get the over 65s tax allowance. The only bugbear is that when I crashed we lost the house, car and almost everything else so we have to pay rent whereas we would have paid off the mortgage and been rent free.
Do you want to be left with state benefits only? Even if you are rent free? The answer has got to be NO! So scrape if you have to but do contribute and forget comparing the pension fund to anything except another pension fund.

Candice-Marie

From what I know... (muppet disclaimer applies!)

1. What happens if I leave the company?

Your contributions would stop (and the employers'). You could leave the pension fund alone until you retire (so always let the administrators know any change of address and keep your paperwork!) OR, dependent on the scheme you may be able to transfer your 'pension pot' to a new scheme, with a new employer. There can be financial penalties for doing this, but not always.

2. Is there any circumstance (apart from reaching retirement age) when I can withdraw money from this pension account? And is it taxable at that time?

Not really. If the pension was wound up (closed) for some reason, if your 'pot' is under £15,000 you can have your contributions back. You would have to pay tax on the amount at whatever your income tax rate is. There are so many ifs, buts and maybes on this, it's best just to assume you don't get access to the money until retirement. Remember that even at retirement you don't just get the money. Under current rules you can take a lump sum from the 'pot' if you want to (I think it might be 25%, not sure. That lump sum is tax free). Then with the rest you have to buy an annuity. Basically this is buying an income from an insurance company. If you look in the best buy tables you can see how much annual income you can buy for, say, a pension pot of £100,000. (Not a lot!) If you're 30 years from retirement you can expect the value of money to fall by about half. (ie what an annual income of £20,000 can buy in 2008, £40,000 pa will be needed in 2038). And then you pay tax on your retirement income too if you earn enough.

3. What happens if I stop working for some reason? Do I get some pension funds back?

I don't think so. The answer is the same as if you left to work elsewhere.

4. What happens if I leave the COUNTRY & get settled elsewhere?

I don't know the full answer to this. You're still entitled to buy your annuity when the time comes, but I've no idea about tax payable etc, sorry.

Candice-Marie

...and to comment on Martin's blog...

If your employer is going to contribute to your pension, then their contribution, plus the tax is effectively FREE money.

The 'catch' with this free money is the fact you're restricted what you can do with it.

Your pension fund would have to perform very badly over its lifetime for you not to end up at least with what you have contributed. That's not impossible of course, but generally speaking has not been the case. So to have the freedom of access to your money you could save regularly...but then you don't get the free money... it's a judgement call really and there are no guarantees either way.

If you wanted to start contributing but don't want to take the hit on your salary, you could always wait until your next pay rise, and say you get a 3% rise, then start a pension at that time, contributing 3%. If you've not had it in your salary, you have less chance of missing it.

chal

At my previous company, they matched up to 5%. At my current company, it's even better - they match my contributions up to 4%, but double it...so if I contribute 4%, they contribute 8%. Haven't come across a better deal on company pensions than this!

JayZed

chal wrote: »

At my previous company, they matched up to 5%. At my current company, it's even better - they match my contributions up to 4%, but double it...so if I contribute 4%, they contribute 8%. Haven't come across a better deal on company pensions than this!

My previous employer did better than that - they doubled contributions up to 5% (i.e. payed in 10% to your 5%)! My current employer only matches contributions up to 5% - BUT they pay me a much bigger salary than my previous employer!

ConstantineXII

Thanks for all the comments. I felt quite lost when it comes to pensions but it is starting to make sense now

I recently joined my company's scheme. Basically, I pay 3% of my salary and they contribute 7% of it (their contribution rises in the future but mine is always 3%). I'm 27 by the way.

And, about getting the money if retiring abroad (I'm not British, but EU national), they told me that they can put the money in any account abroad, no problems.

What I don't know is if I can choose where the "pot" is being invested... no idea how that works.

RichyRich

I'm in a Hargreaves-Lansdown Group SIPP through my employer. I pay 6%, so does my employer.

If I leave the company, can I continue to pay into the SIPP? Obviously my employer would not match my contributions in these circumstances, but is it possible for me to keep contributing nonetheless?

Cheers

socoolmichael

Hi Martin,

At the age of 63 I have just moved to a new job with the promise of employment for at least 5 years. I have cashed in (just in time) my pension for a lump sum and a reduced monthly pension. Like your friend, my new company have offered to match up to 5% of my salary any contributions that I make into a pension fund of my choice, but I do not know where to start. What are my options, can I for instance pay into some kind of savings scheme because it does not seem worthwhile to start a new pension with so little time left. I would really appreciate your advise. Regards, Michael

JimmyTheWig

socoolmichael wrote: »

At the age of 63 I have just moved to a new job with the promise of employment for at least 5 years.
...
my new company have offered to match up to 5% of my salary any contributions that I make into a pension fund of my choice, but I do not know where to start. What are my options, can I for instance pay into some kind of savings scheme because it does not seem worthwhile to start a new pension with so little time left.

You are right to be wary of stock-market linked investments as you don't really have the necessary time to smooth over any dips.
However, if your employer is going to match your contributions I would still say that you should put in the 5% if you can. I really can't see investments paid monthly halving in value in the next five years. Obviously they might, but I doubt it. Anything better than them halving in value and you'll get back more than you put in.
You really do want to choose something with as low risk as possible. A pension is just a wrapper. I don't know if you can hold cash in a pension wrapper, which would be safest, but I am sure that you can hold things like gilts and bonds (I really don't know what I'm talking about here!!) which are the next best thing.

Hopefully someone with more specific knowledge will come along with further help, though you won't get actual advice here as to which funds to pick. The site isn't allowed to do that.
My point is that even with the tight timescale that you are on it is still worth paying in.