completely ignorant about company pensions....

hbgirl

i feel really stupid, but i have literally no idea about anything to do with company pensions, i worked for about 5 years in the civil service, about 3 years for a big american corp and have been working 5 years and still am in a local authority. i've had a couple of years of unemployment in between jobs. i've always paid into the pension schemes. i'm 38 now.

it seems i pay a lot into my pension £200 per month and i could use that money now, some of my colleagues are coming out of the scheme and appreciating the extra cash today...

i just don't understand at all how it works and how to know whether it will be worth it to keep paying in. things is, i want to stop work for maybe a couple of years, go travelling, have kids so is it worth me keep paying in when i won't have paid in my whole working life?

my partner is self employed and has no pension at all. i work in benefits, and it seems why bother paying in when i could spend now and claim pension credit when i retire?

i'm worried i will pay loads in, but it won't leave me much better off than claiming pension credit.

my question really is, where to start with trying to understand it all? i get statements every now and again that might as well be written in greek. i have looked on this board but don't know where to start

help?

dunstonh

it seems i pay a lot into my pension £200 per month and i could use that money now

£200 gross is not a large amount at all. Indeed, for a 38 year old its probably a bit on the light side. It depends on what your planning has been upto now. Seing as that is effectively the household planning for retirement and one of you is self employed then its very light.

some of my colleagues are coming out of the scheme and appreciating the extra cash today...

They are stupid if they are doing that. Still, if they want to be poor in retirement and rely on the basic state pension of £4700 a year but have the money now instead then so be it.

my partner is self employed and has no pension at all.

Thats also worrying. Self employed people don't qualify for the full state pensions. Just the basic. The Govt takes the view that self employed prefer to pay less tax/NI but make their own provision. It appears your partner is pocketing that money now but you will both be paying for it in retirement by not having much income.

i'm worried i will pay loads in, but it won't leave me much better off than claiming pension credit.

Pension credit brings a single persons income upto £6900 a year. Is that really what you want to aim for in your later life?

my question really is, where to start with trying to understand it all?

Your problem is one you are aware of. its a lack of knowledge and you run the risk of taking actions based on assumptions and opinions of those in the workplace (workplace myths are some of the most dangerous and inaccurate out there).

You really need to see an IFA as you need to taught about what you have and what its going to pay you. Your partner needs to be involved as well as he is in for a big shock if he carries on the way he is going. And if you are still together in retirement it will be you that pays for that poor planning as well as him.

hbgirl

thanks for taking the time to reply to someone so stupid!:cool:

where do i find an independent financial advisor? do i have to pay for their services and how much should it cost???

Tibbledom

If the scheme is the LGPS then stay in it.

Your employer is effectively probably paying at least £400 per month towards your pension. If you leave the scheme your employer pays nothing. Effectively you are voluntarily taking a £400 per month pay cut.

It is not a sensible suggestion to plan to be on means tested benefits in retirement. It never works out that way. Because of the re-linking of state pension to earnings possibly in 2012 the means tested top up may not even exist when you retire.

I can't say strongly enough stay in the LGPS scheme. It's an absolute no-brainer of a decision.

Robertf

Often you find your company at least matches your contribution, so although you don't get the money now, you are usually getting the same again from the company that you will effectively lose if you don't pay into the pension.

Can be hard to take a longer term view especially with all the horror stories of pension funds running into trouble, but most IFAs are likely to recommend you stay in the scheme.

hbgirl

thanks Tibbledom, yeah, it LGPS, also, i have always been told my previous civil service pension and my oracle pension were "good schemes" but cos i don't understand i don't know why???

i know i need advice, i tried asking my bank once when i saw a financial advisor but they wouldn't discuss it, and i tried going to the CAB but it's practically impossible in my area to get an appt unless you are in massive debt or about to be evicted or something, which i understand there are people who need the help more than me....

who do i see for impartial realistic advice?

Tibbledom

hbgirl wrote: »

thanks for taking the time to reply to someone so stupid!:cool:

where do i find an independent financial advisor? do i have to pay for their services and how much should it cost???

First step I suggest would be to call The Pensions Advisory Service. They are a voluntary organisation giving general advice on pensions. They will reassure you that the thing to do is stay in the scheme.

Their helpline number is at http://www.pensionsadvisoryservice.org.uk/

An IFA will just tell you to stay in the scheme. At least I hope they would.

I'm a volunteer at my local CAB as it happens!! We often refer people on to the Pensions Advisory Service. I also spent a number of years working out how much people who had been mis-advised by financial advisers to leave schemes like the LGPS (especially the tied salesmen working for banks and insurance companies) had lost out by. The numbers were frightening.

This is what it says on the CAB website about occupational schemes generally (and the LGPS is as about as good as it gets as far as occupational schemes go so adapting it to your position I think the word "usually" can be deleted)

http://www.adviceguide.org.uk/index/your_world/consumer_affairs/pensions.htm#Organisationsthatcanhelpgiveadviceonpens

"If you are thinking about leaving an occupational pension scheme, you should consider the implications of this very carefully, because an occupational pension scheme will usually be far more advantageous than a personal pension scheme. In addition, an occupational pension scheme may be reluctant to allow you to return to the scheme after you have left to take out a personal pension. If you decide to leave, or decline to join, an occupational pension scheme, you will then have to contribute towards additional pension or a personal pension.
If you are thinking about leaving a personal pension scheme, you should get independent financial advice first. You can find information on how to get independent financial advice on the pensions page of the Financial Services Authority website at www.moneymadeclear.fsa.gov.uk."

jem16

hbgirl wrote: »

thanks Tibbledom, yeah, it LGPS, also, i have always been told my previous civil service pension and my oracle pension were "good schemes" but cos i don't understand i don't know why???

They are final salary pensions which are now few and afr between. The LGPS is government backed so safe as houses. Your pensions are not subject to stock market conditions but guaranteed and worked out on your final salary and number of years service. If you are paying £200pm into the LGPS you must be on a salary of over £40,000 already as contributions are from 5.5% to 7.5% of salary. Either that or you are buying back years?

You also have various benefits in the LGPS such as spouse benefits and lump sum death benefit. Anyone leaving or opting out of the LGPS needs their head looked at.

i know i need advice, i tried asking my bank once when i saw a financial advisor but they wouldn't discuss it,

They are not qualified to discuss final salary pensions nor transfers. They would onl;y have been able to sell you a new one which would have been very poor in comparison.

who do i see for impartial realistic advice?

An IFA would still be good advice as your partner has no planning whatsoever and you need to think about this together rather than separately.

Also as far as the LGPS pension is concerned your union would probably put you in touch with an IFA who knows the LGPS.

Tibbledom

jem16 wrote: »

Your pensions are not subject to stock market conditions but guaranteed and worked out on your final salary and number of years service. If you are paying £200pm into the LGPS you must be on a salary of over £40,000 already as contributions are from 5.5% to 7.5% of salary. Either that or you are buying back years?

Yes, I was wondering about that too.

And I would agree that as they are unsure what to do pension wise seeking the advice of an IFA jointly (e.g. via the FSA link above) is a good idea. The Pensions Advisory Service can explain why leaving the LGPS is a bad move but they cannot give individual advice on which company her partner should invest with if he is taking out a pension for himself.

Tibbledom

hbgirl wrote: »

thanks Tibbledom, yeah, it LGPS, also, i have always been told my previous civil service pension and my oracle pension were "good schemes" but cos i don't understand i don't know why???

The main reason is that your employer is making substantial contributions towards your pension which you don't get if you are not in the scheme. The local LGPS scheme in our area pays about 13% of salaries in at the moment on top of the employees contributions. Now that doesn't mean they are paying in 13% for you because there are cross subsidies between different employees and different LGPS schemes have different funding positions and there are some technicalities of contracting-out that I am ignoring, but is a good guess at what you would lose out on i.e. 13% of your salary.

And the benefits of the LGPS are targeted for when members are in most need, for example benefits on death in service including dependant's pensions, enhanced benefits if you have to retire in ill health in some cases. Have a look at a LGPS scheme booklet some time.

And as jem16 says none of it is dependant on the vagaries of the stock market.

dunstonh

The LGPS scheme is worth every penny. Whilst its costing you £200 (its acutally lower than that as you get tax relief), its probably closer to someone having to pay around £700pm to get the same benefit from a personal pension.

This is why anyone at work pulling it is really foolish. These types of scheme are hard to come by now and most of us here would jump at a chance to access it.

To repeat, pulling out of the LGPS scheme is one of the worst financial decisions that they are ever likely to make.

i know i need advice, i tried asking my bank once when i saw a financial advisor but they wouldn't discuss it

There is pressure on the FSA to stop allowing tied agents and sales reps from using the term adviser in their title. Indeed, many banks have already dropped that title formally and you see words like financial consultant or similar on their business cards. They are not full financial advisers. They have a reduced remit than that of an IFA.