Can I pick a brain or two pls?!

bradders33

Hi all,

These are the two pensions available at my work at present, which one is the "best" it might as well be in Japanese for all I know about blimmin' pensions. Ta!

I am a female, 28 years old, married, in full-time employment. Don't currently have a pension.

Also, how much should I be putting in?

Thanks for your help!!

Bradders. x


Company Pension Scheme:

- Employee contributions
(as a percentage of pensionable salary) = 6% or 8%.
- Employer contributions = The employer pays the balance of cost to provide the benefit you have been guaranteed. Currently 16%.
- Contracted out Status = Contracted out of SERPS.
- Normal Retirement Age = 65.
- Pension Benefit = 1/60th of your final salary for each year of Pensionable Service (see booklet for illustration) for 8% contributions OR 1/80th for 6%.
- Early Retirement (subject to company consent, from age 50) = Unreduced pension benefit for retirement between 60 and 65. Reduced pension benefit for retirement between 50 and 60, reduction rate currently 3% p.a. of the benefit earned to the date of retirement.
- Life Assurance = 4 x salary.
- Ill-health retirement = 1/60th of pensionable salary (based on 8% contributions)!at retirement for each year of Pensionable Service and, at the Trustee’s discretion, the Trustee can add in the additional years of Pensionable Service to Normal Retirement Date.! 1/80th based on 6% contributions.
- Investment Risk = The employer carries the investment risk. You will be provided with the benefits detailed in the booklet.
- Charges = None.



Company Money Purchase Plan

- Employee contributions
(as a percentage of pensionable salary) = 3%, 4%, 5%.
- Employer contributions = 6%, 8%, 10%.
- Contracted out Status = Contracted in to SERPS.
- Normal Retirement Age = 65.
- Pension Benefit = Pension is purchased with your fund value at retirement (see booklet for illustration).
- Early Retirement (subject to company consent, from age 50) = Pension is purchased with your fund value at retirement. The earlier you retire the more expensive it is to purchase pension.
- Life Assurance = 3 x salary.
- Ill-health retirement = Proceeds of the plan at the time of ill-health retirement used to buy a pension.!
- Investment Risk = Your Pension at retirement will depend on the size of the fund and annuity rates (which are related to interest rates) at your retirement date.
- Charges = Accounting and admin charge! : £27 p.a. Pension purchase charge: £350. Plus investment management charges, switch charges etc. (Please refer to booklet.)

dunstonh

first one is better and you should get in there whilst you still have the chance. These types of schemes are like gold dust now. You are throwing money away by not being in either of these pensions.

EdInvestor

If you can manage the 8% it would be well worth it for the higher pension.

bradders33

Oh, okay, thanks for that you two. Unfortunately I cannot afford 8% at the moment... (6% will be a struggle too! But I will do it.) but could I change to 8% at a later date if I wished?

Also, I don't understand the Company Contribution bit on the first one, can you simplify it for thicko's like me?!

Oh and, if I levae my company, what happens to my pension??

Sorry for all these questions.

bradders33

Oh and... Sorry... How then do I work out what my contributions will equal as a pension when I retire? Sorry, if I sound as thick as pigs' doo-daa here! LOL!

dunstonh

You really do need to be looking at affording it. The pension is based on years of service and the longer you delay, the less you get. You are throwing potentially thousands of pounds away by not joining this scheme.

Say you joined now and picked the 6% scheme and retired at 65. You would have 37 years of service and for each year you get 1/80th. So that is 37/80ths of your pensionable salary. If your pensionable salary was £20k now, then that would be a pension of £9250 in todays terms. Stick your state pension on top and you have a comfortable life in retirement.

bradders33

dunstonh wrote:

You really do need to be looking at affording it. The pension is based on years of service and the longer you delay, the less you get. You are throwing potentially thousands of pounds away by not joining this scheme.

Say you joined now and picked the 6% scheme and retired at 65. You would have 37 years of service and for each year you get 1/80th. So that is 37/80ths of your pensionable salary. If your pensionable salary was £20k now, then that would be a pension of £9250 in todays terms. Stick your state pension on top and you have a comfortable life in retirement.

Hiya, thanks.

No, I said I can't afford the 8% for deffo, and the 6% will be a bit of a struggle too, but I will HAVE to afford that one, as you say, it's a good deal.

Right okay, and that example figure of £9250.. Is that a lump sum or what you get yearly to live off of?

Do they work out 1/80 of my salary on what my basic is or what my P60 says?

EdInvestor

It's based on final salary - ie the salary you're on when you retire.

If you leave the company it will be based on your salary at point of leaving but increased by inflation or 5% until retirement age.

margaretclare

The point is: you put in 6% and the employer puts in a percentage, making the total up to 16% (have I got that bit right?) Whatever the percentage you put in, the employer at least matches it.

If you don't put in your 6% then neither does the employer. It's like turning down a pay-rise. Suppose you were told you were getting a pay-rise of 6% or 8% - you wouldn't refuse that, would you?

IMHO the best idea is to set up your pension arrangements while you still have years for it all to run. Then once it's set up forget about it, get on with running your life. Look at it again in a few years' time and be pleasantly surprised.

Can't help with your other questions, but that really is the bottom line.

Margaret Clare