First job and joining pension scheme

MaryMay

My daughter started her first job in July after graduating. She has been given all the papers for joining the Company Pension Scheme and is undecided. The job is a permanent live- in post on a low salary(less than £10k) and most people seem to stay 1/2 years to gain experience to help further their career. However if things don't improve she may be there quite some time so it seems sensible to join the scheme. It is called New Generation Personal Pension and seems a good deal to me. If she pays £15.98 per month, her employer pays £39.84 per month. It seems on reading all the papers that money can be added in the future, minimum £1000, so this might be a way of saving for her myself rather than giving her money for an ISA. The charges by the way are 1% per year with £132.67 charge when the plan starts then £1.49 per month from month 13 for rest of the plan. Presumably when she leaves this company the payments will cease and the pension will just sit there? One last question, she has the choice of retirement date, is it better to say 50 whilst she still has the chance (it changes in April 2010 I understand) on the understanding that if she is still working then she does not have to take the pension?
Thank you.

dunstonh

Presumably when she leaves this company the payments will cease and the pension will just sit there?

yes

she has the choice of retirement date, is it better to say 50 whilst she still has the chance (it changes in April 2010 I understand) on the understanding that if she is still working then she does not have to take the pension?

Doesnt matter if she says 50. It will automatically increase to 55 from next year anyway. Her state pension age is 68 (assuming she is in 20s). So, she could select that. Or she could select 75 which is the current maximum. It really doenst matter. You are not held to that age. Its just an age that the illustrations sent each year will be based on. So, state pension age is probably best as in reality most finish up close to that.

She has been given all the papers for joining the Company Pension Scheme and is undecided.

She pays £15.98pm gross (not net) and the employer adds £39.84 of free money to it.

So, for £12.78 reduction in her monthly pay, she gets £55.82 added to a pension. Its a total no brainer and she should jump at it straight away.

markr007

Note, that if she is there for only 6 months she may wish to move it elsewhere as otherwise the charges will erode what will be a small pot.

MaryMay

Thank you for both these replies.
I think its a no brainer too and have been trying to persuade her for 3 months that its a good idea! She is putting a lot of her earnings into savings, a 1 year account with good interest but she realises now she should be putting it into an ISA. She is not earning enough yet to begin paying back her student loan.
She will stay in the job for at least 1 year if not 2, to get all the experience she needs to move on to the next stage in her career, but it is possible it will be abroad so there will not be another pension to move to until she returns.What happens in this instance? I dont want to advise her then find it is the wrong thing to do in her case, if she had no intention of moving it would be the best thing to start this early to save for her pension, (she is just 22) but she will be moving on.

dunstonh

Note, that if she is there for only 6 months she may wish to move it elsewhere as otherwise the charges will erode what will be a small pot.

Modern pensions are percentage based. Especially works ones. So, its virtually impossible to have a fund eroded by charges.

so there will not be another pension to move to until she returns.What happens in this instance?

She leaves it where it is or moves it to another pension.

margaretclare

Oh for heaven's sake, girl, join it. In your place I would be snatching their hand off. Turning it down is the same as refusing a pay-rise - it's free money from the employer, as well as from the taxman. You don't get a deal like that anywhere else. Still less do you get it from savings, which are gaining a pitiful amount in interest (although you do need savings as well).

All the people I know of, family members included, who joined a pension scheme on day one have never regretted it. Those who did turn down this free money are bitterly regretting it now.

MaryMay

Thank you for replies, I will email my daughter and tell her to get on with it today!!

markr007

Modern pensions are percentage based. Especially works ones. So, its virtually impossible to have a fund eroded by charges.

Yes, but that isn't how they were described in the original post...

DiggerUK

MaryMay,
Lets see if I have this right.
You meet somebody who offers you free money. Do you:-

a. Call the police.
b. Run a mile.
c. Say to yourself, if it seems to good to be true, it is.

There is no such thing as free money.
There are plenty of safer ways to put money away for retirement, advise your daughter to look at the many ways to put money away for retirement that leave her in total control of her retirement savings.

dunstonh

markr007 wrote: »

Yes, but that isn't how they were described in the original post...

The charges are contribution based. So, if she stops, the charge stops leaving just the AMC.

markr007

The charges are contribution based. So, if she stops, the charge stops leaving just the AMC.

This information isn't in the post:

The charges by the way are 1% per year with £132.67 charge when the plan starts then £1.49 per month from month 13 for rest of the plan.

I assume you have googled the "New Generation Personal Pension" and therefore have further information.

Based on the information in the post charges would eat away at the fund. Assuming you do have other information and it is just a 1% amc on leaving then yes it could be left where it is.

There are plenty of safer ways to put money away for retirement, advise your daughter to look at the many ways to put money away for retirement that leave her in total control of her retirement savings.

Mary, please do not take any notice of Digger.

Disclaimer:
I am not now, nor have I ever been, an Independent Financial Adviser.
I'm far too nice.

Thank **** for that.