New job & pension scheme

freakyogre

I have started a new job today and am just going through all the necessary forms. One form included is about the company pension scheme and asking if I am interested. It's £20 minimum payment per month.

I don't really understand pensions and haven't really thought about them before now (i'm 24).

What would this involve? (sorry, but as simple as possible would be helpful!) Is it a good idea to do it? If so, what is a reasonable amount to put in each month (within reason?)

Thanks for any help

jem16

Does the company pay any contributions to the pension also? If it does then yes it's "free money" so take it.

freakyogre

It says they will add contributions of 5% of the salary.

dunstonh

5% contribution is actually only 4% of your net pay as there is tax relief. So, lets say you earned £20,000 a year. you pay in 5% which is £1000 but really only costs your £800 (with tax relief being the £200 difference) and the employer adds £1000. So your pension contributions are £2000 but have only cost you £800. Free money. Go for it every time.

jem16

freakyogre wrote: »

It says they will add contributions of 5% of the salary.

Jump at the chance then!

McKneff

Grab it with both hands, it like getting an extra £1200 each year for nothing.

freakyogre

Sorry to sound dense, but like I said, I don't really understand them overall.

What would happen if the job doesn't last very long? (having been made redundant twice already i'm not going to pretend it won't happen)
What happens at the end of employment?

I always thought of them as something long term and at the moment with things the way they are, i'm wary about any job lasting "forever".

jem16

freakyogre wrote: »

What would happen if the job doesn't last very long? (having been made redundant twice already i'm not going to pretend it won't happen)
What happens at the end of employment?

You can transfer the pension to another scheme or leave it where it is to grow. depends on the scheme's rules.

whitfreak

Presuming you stay with the company for 2 years that is, most company schemes won't let you stay with the scheme if you've got less than 2 years. Then you'd either get your contibutions back (minus the tax) or have a deadline to transfer your pot elsewhere.

McKneff

whitfreak wrote: »

Presuming you stay with the company for 2 years that is, most company schemes won't let you stay with the scheme if you've got less than 2 years. Then you'd either get your contibutions back (minus the tax) or have a deadline to transfer your pot elsewhere.

as you say, minus the tax, but also minus the company's contribution.
and not necessarily 2 years, may be only 1

freakyogre

Hmm, doesn't sound great then. I doubt i'll bother as you can never guarantee how long a job will last anymore.