New Job, Pension Scheme! all new to me...

bobins

Hi there,

I am a 22 year old graduate who is about to start a new job on the 29th August. I have a few questions about the benefits available to me as all this (pension,life assurance etc) is all new to me as my last job didnt offer anything..

Basically I would just like to get an idea how a contributory pension scheme works? The company offer a "5% employer pension contribution", am I correct in thinking that this means, I pay 5% of my wages into a pension and they will match it? So does this come out of my pay cheque each month?

As for other benefits, they say "I have the opertunity to participate in the company private medical health care, life assurance and permanent health insurance scheme". I take it that if I decide to take them up on these then they will also cost me?

Sorry if these seem like silly questions, just all new to me and I would like to understand a little at least before I start

Many Thanks

MrChips

It is impossible to answer your questions without seeing the scheme documentation. Some companies will pay for all the above benefits without the employee's pay being affected, others will expect the employee to sacrifice their cash pay by the value of the benefits offered/taken. When it comes to pension, as the scheme is "contributory", you will probably need to pay something yourself (although your contributions will be made before you pay tax so will cost you less than if you took the money as cash) - but the company might pay their 5% for you regardless of what you pay in - or they may only match.

Ask your HR department - they should be able to answer this for you.

Imelda

hi bobins,

Re the pension, it depends on your company, mine contribute 5% and then match 1.5 times what I put in (currently 2% so I get 10% overall). Your contributions are tax deductable.
With the other benefits, again it depends on the company, mine pays for my health insurance and life assurance but the benefit is taxable so take this into account.

bobins

Hi and thats for your comments.

I recieved my contract through the post the other day which has a bit more information on the pension.

"After 12 months service, the company will also contribute 5% of your basic annual salary to the scheme on your behalf provided that you also contribute a minimum of 3% of your basic annual salary"

All in all is it better to join company pensions schemes rather than start your own? Remember I am only 22, but think it is going to be worth while in the long run if I start contributing sooner rather than later.

EdInvestor

All in all is it better to join company pensions schemes rather than start your own?

Assuming they involve free money from the employer, yes.Basic rate taxpayers would otherwise be better to use their investment ISA, as this tax perk is "use it or lose it" on an annual basis, while you can catch up on the pension tax relief later.