pension scheme or more pay today

presenthyme

opinions please
if i took a job with a pension facility my pension contributions would cost 3k per year. if i do not join the pension scheme i would gain 3k per year as extra salary today.
pension scheme is final salary with 6% contributions from myself and employer, which i know is good by todays standards, but i only envisage working for 5 yrs in this position.
can i have some opinions whether to go for "jam today" in salary or "jam tomorrow" in pension.

Fran

Hi,

I have moved this to the Pensions Board where you might get more response.

margaretclare

You may have seen some recent publicity on the women's pensions issue - the majority of women retiring now, and those already retired, are going to be living in poverty because of low or inadequate pension provision.

This kind of 'jam today' argument is exactly the reason why. Women who were married and working used to have the option of paying a lower NI contribution and so did not qualify for a state retirement pension in their own right. Many of them who worked where there was a pension scheme chose to keep their hours just below full-time so that they did not qualify to belong to the pension scheme e.g. the NHS. They therefore missed out on the employer's contribution as well.

These kind of provisions no longer apply, but the report I read only last week said that one-third of young women were not making any pension provision for themselves. I don't know your gender, but even if you only stay in this job for 5 years you'll have built up a beginning to your pension fund, and nowadays, if you move jobs you can usually take your pension fund with you. Some pension schemes also carry life assurance which is useful.

If you opt for 'jam today' you're effectively throwing away the employer's contribution and any tax relief. You won't notice the 'things' you buy with the money in your hand. You will notice it in years to come, when it really matters.

Be wise!

Aunty Margaret

Nick_C_4

I have to agree - from the numbers you quoted it sounds like you're a higher-rate taxpayer, which makes it even better value for money. 5 years is plenty of time for pension contributions to be worthwhile.

My wife doesn't work anymore, but has three pensions she's contributed to through the years. None of them are worth a lot, but together they'll pay out around £9K a year, which is going to make a big difference to us.

Nick.

dunstonh

£3k of contributions will not equate to £3k in your pocket. Assuming just tax at 40%, you will only get £1800 now compared with the £3000 going into the pension. You may/should also benefit in reduced NI contributions depending on how your employer contributes to the pension.

MrChips

Don't forget the employer contributions as well - being a final salary scheme these are likely to be in the region of 20% (you can find out exactly what they are by asking the trustees for a copy of the "schedule of contributions"). You will effectively be thowing away a 20% pay rise if you don't join the scheme.