Pension being changed

sabelu

Hi when I joined my current company seven years ago we had a non - cont final salary scheme. Soon after this became a 50/50 final salary in 2003, new employees Money Purchase, and this was wound up in 2005 and transferred to a CARE scheme. Today we have been given 60 days consultation of a change to a 'Defined Contribution arrangement'.

Main section of letter:

" The company believes that the new scheme will give a more equitable and balanced approach to pensions for all our employees and provides a sustainabe pension policy for the future. The Company's objective is to maintain itscommitment to provide a competitive pension scheme whilst making sure the costs and risk are manageable".

I have been asked field questions any ideas?

Is this really bad?

What is a Defined Contrbution scheme?

Can I opt out and get the company contribution paid into a SIPP?

Day_Trader

sabelu wrote: »

Hi when I joined my current company seven years ago we had a non - cont final salary scheme. Soon after this became a 50/50 final salary in 2003, new employees Money Purchase, and this was wound up in 2005 and transferred to a CARE scheme. Today we have been given 60 days consultation of a change to a 'Defined Contribution arrangement'.

Main section of letter:

" The company believes that the new scheme will give a more equitable and balanced approach to pensions for all our employees and provides a sustainabe pension policy for the future. The Company's objective is to maintain itscommitment to provide a competitive pension scheme whilst making sure the costs and risk are manageable".

I have been asked field questions any ideas?

Is this really bad?

What is a Defined Contrbution scheme?

Can I opt out and get the company contribution paid into a SIPP?

Defined contribution means that the company pay a set percentage of your salary into the new company scheme. Is this bad? Well compared to where you were with final salary it isn't as good but you still have a scheme. More and more of this will happen as the companies find it difficult to afford final salary schemes. Can you opt out - possibly but you'll have to check with your scheme admins. Equally you don't state what type of scheme it will be - it could be group SIPP (Self Invested Personal Pension) or group stakeholder for example. If it's group SIPP then why would you bother opting out?!

sabelu

Day_Trader wrote: »

Defined contribution means that the company pay a set percentage of your salary into the new company scheme. Is this bad? Well compared to where you were with final salary it isn't as good but you still have a scheme. More and more of this will happen as the companies find it difficult to afford final salary schemes. Can you opt out - possibly but you'll have to check with your scheme admins. Equally you don't state what type of scheme it will be - it could be group SIPP (Self Invested Personal Pension) or group stakeholder for example. If it's group SIPP then why would you bother opting out?!

Believe it will be money purchase

cloud_dog

sabelu wrote: »

Is this really bad?

The main difference between a Defined Benefits and a Defined Contribution is that the employer is shifting the risk on to the employee. It basically resolves them of any commited obligation for a pension based on a percentage of your final salary (excluding people already drawing a pension).

sabelu wrote: »

What is a Defined Contrbution scheme?

You agree a (defined) amount to contribute, you and the employer.

cloud_dog

sabelu

What questions should I submit on the subject during the consultation period

Day_Trader

Questions you should ask in your instance:

What choice of funds do we have?
If I don't like the choice can I opt out and have my contributions paid elsewhere?
Is it a matched contribution (i.e they give you 4% if you pay in 4%) or non contributory (they pay the contribution regardless)?

They should answer most queries in their consultation document really. The main worries people have is around Data Protection - i.e. who runs the admin, who might see your salary etc.

Hope this helps.