Pensions Headache - must decide by Thursday

aliceelizabeths

I need some advice on what to do. I work for a university, am 23 and already have a small pension with standard life from my last job but I haven't paid anything into that for nearly a year.

Presently I am on a pension scheme that gets deducted from my wages and is held by the university at a rate of 6% per month, this is going up to 9% (about £130-£140) next month...though I don't pay NI or tax on this so the actual amount is a £110-£120 reduction in pay per month. This rate is fixed and is rather a lot...not sure I can really afford it but the contributions the university make on top are large.


The university then also pays in a large sum so I am, as long as the uni doesn't go under I suppose, guaranteed a large pension. It has been here a long time so it doesn't look as though it would but stranger things have happened.


This scheme is closing to new entrants next Thursday so I have to decide before then or I will only be allowed to enter on the new cash contribution scheme... which will probably not be as good, will be invested in much less 'robust' things and the risk will be entirely on me. I could be left with nothing, a similar amount, less or perhaps even more?! but it's all unknown.



Don't know what to do, know it's up to me but I'm confused.



I don't know whether I will work here forever but that I will work somewhere within the University for the forseeable future is entirely possible, if not a near certainty.



Do I opt to stay in the pension scheme now and secure my future?



Or opt to stay out until all my debts are repaid, close to £4000 after moving house to our first unfurnished property and being out of work a couple of months, plus a student loan, and rejoin on the cash contribution scheme?



I have until Thursday to decide :S

seven-day-weekend

I'm no expert, but the little bit I do know says , stay in this scheme, it is excellent and gives you free money. You'll be glad of it when you reach my age. (60).

Shimrod

+1 for staying in the scheme. You already recognise that the investment risk stays with the university rather than with yourself. Even if you subsequently leave the university elsewhere, you will still have 'locked away' a nice chunk of final salary pension. The contributions the university makes to the scheme will be worth significantly more than they would pay into a defined contribution scheme. You may also want to check for extra benefits (such as spouse's pension, guaranteed penions payment period) that come with the current pension scheme that you would otherwise have to pay extra for (i.e. take a reduced pension) with the defined contribution scheme. The difference in cost to you of 6->9% is only going to be around £30per month after tax - I'd work hard at finding that saving to stay in the pension scheme.

aliceelizabeths

it's horrible, I know that 's the sensible decision...

I also happen to be typing up minutes confirming the rate the uni will be contributing for the new pensions, and it a similar amount to what they contribute to the present scheme but as I know, the risk isn't with them.

and then I also have £4000 worth of debt to clear that I do really want cleared and it's going to take a few more months if I opt in.

urg...

Ian_W

aliceelizabeths wrote: »

I don't know whether I will work here forever

Pity, you wouldn't have needed a pension.;)

but that I will work somewhere within the University for the forseeable future is entirely possible, if not a near certainty.

I'm with the others. The 3% is a bit less due to tax relief and the Uni is paying far more into the scheme than you. Final salary schemes are becoming rarer, not because they're bad but because the're too good and therefore too expensive.

bigbigmamamoo

aliceelizabeths wrote: »

and then I also have £4000 worth of debt to clear that I do really want cleared and it's going to take a few more months if I opt in.

urg...

in the grand scheme of things getting your £4000 of debt cleared a few months sooner is worth far less than a final salary pension

Loughton_Monkey

I would also join the band telling you to bite their hands off. Forget any short term regrets you might have with a small cash flow problem. When you get to my age (60. I don't look it. [but I used to]) you will appreciate it more than you could imagine. Or conversely, if you don't you will regret it for the rest of your life.

Procrastinator333

Imo - If they are closing it and offering something else, it is because the current scheme costs them too much money.

You will be the recipiant of that "too much money".

For me, you almost don't need to look at either scheme, if they are closing it, it is almost certainly better than what is about to be offered. I would take it.

But don't be surprised if in another few years they shut the scheme for existing members too.

LillythePink

I'm with the others, if you are being offered a final salary scheme - go for it

Defined contribution schemes are not so good (for you) but cheaper for them to run.

I have a final salary scheme at work they closed it to new members a few years ago, currently I have about 24 years accrued and it's going to be a big pay out at the end

new_to_the_game

I agree with most here, there are fewer and fewer new incentives like yours definatly in the final salary schemes, and I just missed out on joining the final salary pension scheme at my workplace as they closed it off to new employees just before I was eligable to join, but my employer is putting in one and a half times what I contribute up to a maximum of 6% and to say its my 1st real pension scheme and I am now 47 going on 48 so I wish I had the opportunity (and scheme) to join a scheme like yours years ago, but never had the chance.
Stay with it and grin and bear it, because when the time comes you will reap the benefits many won't have.

rehards
chris