Accessing pension before retirement

aqueoushumour01

Hi. I've only just started my career and 5% of my salary is paid into a pension. I know it's probably a good thing to be paying something towards a pension but there is a part of me that feels frustated that I won't be able to access that until retirement - it is of course my money and yet I won't see any of it for many years. The deduction is mandatory, and the company doesn't contribute anything. Is there any way to sell the pension rather than having to wait until 65?

MrChips

Based on current legislation, you should be able to access it at age 55, rather than waiting until 65. However you won't be able to access it any earlier than this.

I'm surprised that the 5% deduction is mandatory as there is no requirement to pay into a pension if you don't want to. Are you sure it isn't really a company contribution dressed up as a deduction to your salary via a flexible benefits/salary sacrifice arrangement?

Paul_Herring

The deduction is mandatory, and the company doesn't contribute anything.

You need to query this - is it part of your contract of employment?

dunstonh

I know it's probably a good thing to be paying something towards a pension but there is a part of me that feels frustated that I won't be able to access that until retirement

Why are you fustrated that money you are putting aside for retirement wont be available until retirement? Surely that is why you are doing it?

If you want to put money aside for the shorter term then you use a different product.

The deduction is mandatory, and the company doesn't contribute anything.

Are you sure? I think you should get that in writing as I am sure that would be a breach of employment law. Indeed, I know it is as the Govt have been told that forcing people to pay into pensions would be a breach of EU law.

I would suggest you check the policy booklet and confirm that there is no benefits being received from the employer. If its a final salary scheme then it doesnt matter what the employer pays. If its money purchase then it does.

Is there any way to sell the pension rather than having to wait until 65?

No. The Govt doesnt give tax incentives for people and companies to save towards their retirement only to blow it before they get there.

Also, note that if you have just started your career, that makes it sound like you are young, perhaps in 20s. That would make your state retirement age 68. Not 65. With the basic state pension being £4700 a year and even if you got the maximum second state pension benefits that would only be little more than just over £3000 on top of that (and the Govt has reduced S2P benefits 4 times retrospectively in the past so I wouldnt rely on that one). So, unless you fancy finishing work at 68 and looking forward to under £10k of income, then you should pay and starting young is cheaper in the long run.

MikeJones_2

Hi,

aqueoushumour01 wrote: »

The deduction is mandatory, and the company doesn't contribute anything. Is there any way to sell the pension rather than having to wait until 65?

I'd back up MrChips's comment here in that the company cannot make you pay into a pension. To satisfy our curiousity, can you tell us exactly what type of pension it is (if in doubt ask your HR department, or if there isn't one, someone who deals with the pensions)?

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

MrMicawber_2

I'd back up the comments above - not saving for retirement is likely to lead to a grim future at some point and the earlier you start the smaller a % of your income you need to put in. ISA's are also good vehicles for retirement saving / investing but you can get at the money. Not being able to get at your pension is actually a distinct advantage.

Look forward to hearing the t's & c's of your pension after you've checked.

aqueoushumour01

thanks for your replies. It's a flexbile benefit arrangement whereby I can use the total salary to 'buy' options such as health care etc... 5% is taken from that towards a DC pension and the rest I can take as cash if I want (minus taxes). The wording is that a part of the fund is reserved for the pension. So I suppose it can be interpreted in two ways. Either that my salary is X and I have to pay out 5% to a DC pension or my actual salary is X-5% and the company pays the pension component.