Pension scheme finishing

Katykat

My daughter works for YMCA Training. I encouraged her to join their pension scheme because to me it seemed a really good one.She contributes 6% and they contribute 14% of her salary which is £16000 at present, she has 9yrs contributions They have now informed all employees that they are ceasing this June. She is wondering what to do for the best. She is 29 and has an interest only mortgage, and £1000 debt on a 0% credit card. She will have £100 extra salary per month. I've suggested she pays an extra £75 off the mortgage, extra £25 off credit card until its paid, and then pay the £25 into an ISA, gradually increasing it each year. Should I be encouraging her to take out a stakeholder pension though? Even though both me and OH have pension schemes, I feel very uncertain about the future of the whole pension muddle, and that this may be a more secure investment.

dunstonh

Should I be encouraging her to take out a stakeholder pension though?

I would be more worried about the mortgage at this stage.

I feel very uncertain about the future of the whole pension muddle

There is no pension muddle. It is a media driven scare story. There are some issues relating to certain schemes and there are considerations about increasing state retirement age but there isnt the problems that the media makes out.

Is there an alternative scheme being introduced in its place? Often when one scheme closes, another replaces it. They may not be as generous but there may still be some contribution from the employer.

EdInvestor

The pension rules are changing in April, so the old "use it or lose it" system where you lost your tax-free annual allowance if you didn't pay in every year is being replaced by a lifetime allowance.

Your daughter has already made a good start, and now she can add to this later without losing out by not contributing now (unless there is a replacement company scheme with more free money).

I would agree with DH that reducing the mortgage amount is more sensible than ISA saving, until she has got the loan amount down to the level where she can switch to repayment. After that, assuming there is no company plan, an ISA would be a better idea than a stakeholder, as the ISA allowance is still on the "use it or lose it" basis.

Pal

I don't know the background but I am guessing that the YMCA is closing its final salary pension scheme and introducing a new scheme for all staff. Best bet would be to check out that new scheme and join that as there will almost certainly be free money to be had from join it.

Katykat

Thanks guys, I'm not too sure that they are offering anything else in its place, in their letter, they recommended Stakeholder pensions, so unless they pop something out of the bag, looks like thats it. To be fair, it is a charity run organization, and i always felt that 14% employer contribution was an extaordinary level that was too good to last. She has been given th option of transferring her own ( but not THEIR) contributions into another pension but am I correct in advising her to leave it where it is? The only reason she contributed the maximum was because their 14% made a huge difference. it would be a shame if she missed out on that. Incidentally, does that sound right, that they will only transfer her contributions?