Questions about the upcoming forced working pension

wardrobe

Im mid 30's

The company i work for dont offer a pension, i believe in a few years time they will be forced to open and contribute to one for an employee who doesn't have a pension.

i currently dont contribute to a pension (currently i've been stashing all my money in ISA's as im scared about losing it if the pension scheme collapses)

I have an armed forces pension
i have a pension from a previous employer.

i cant add any more money to the 2 above pensions.

will i be forced to take out another pension and make contributions?

more importantly if i start a new private pension now and make contributions, when the company i work for is forced to open pensions for people and make contributions will they make contributions into my own private pension like they will for the forced one?

thanks

kidmugsy

Your employer will be obliged to offer a scheme: you will be allowed to opt out. Of course, that would mean that you were rejecting "free money". But since it would also save the taxpayer money, please go right ahead.

hugheskevi

The company i work for dont offer a pension, i believe in a few years time they will be forced to open and contribute to one for an employee who doesn't have a pension.

Correct, although it will be several years before the minimum contribution rate increases from very low levels (2% of banded earnings, which will probably be about £5,000 less than your actual earnings)

i currently dont contribute to a pension (currently i've been stashing all my money in ISA's as im scared about losing it if the pension scheme collapses)

This shouldn't be a concern - the way assets are held means that you are not vulnerable to losing your pension should a firm providing it become bankrupt.

will i be forced to take out another pension and make contributions?

You will be automatically put into a pension scheme, which you will be able to opt-out from after you have been put into it.

more importantly if i start a new private pension now and make contributions, when the company i work for is forced to open pensions for people and make contributions will they make contributions into my own private pension like they will for the forced one?

The company will not be forced to provide a particular type of pension. What they have to do is provide a pension meeting minimum criteria. They could make contributions to your personal pension, or the company could meet its obligations in a number of other ways.

dunstonh

i currently dont contribute to a pension (currently i've been stashing all my money in ISA's as im scared about losing it if the pension scheme collapses)

Pensions have identical FSCS protection to ISAs. There has not been a money purchase pension scheme collapse. With modern unit linked schemes which have ringfenced assets, you would have to see a chain of events occur where you wouldnt care about the pension any more as you would be too busy boarding up your house, getting guns and stocking up on tinned beans.

will i be forced to take out another pension and make contributions?

No. you can turn down the free money and be worse off.

Loughton_Monkey

wardrobe wrote: »

i currently dont contribute to a pension (currently i've been stashing all my money in ISA's as im scared about losing it if the pension scheme collapses)...

Rather a curious attitude.

If you mean Cash ISA, then that is not properly investing for retirement, since savings are not even keeping up with inflation.

If you are using a Stocks & Shares ISA, then you are presumably investing in very similar funds to those of a pension scheme. Either fund is just as vulnerable [but actually quite safe in reality].

wardrobe

Ok, thankyou all for the responses. I will now start to save £500 a month into a personal pension, time to start looking at the different options no doubt it wont be very straight forward.

btw Monkey , my ISA's are cash

gadgetmind

For an example of how the underlying investments of pensions, ISAs, and other savings are the same, go to the Hargreaves Lansdown web site.

You can hold with them a SIPP and/or ISA and/or a fund/share account (I only have two of these, many people have all three) and you can choose within each what type of investments to hold with each of these accounts/wrappers. Funds, shares, Investment Trusts, ETFs, bonds, and all kinds of other fancy stuff, all of these are options. The fee structure changes a little depending on the "wrapper" but what changes most is the tax position.

With a SIPP (a kind of pension) you get tax relief on the way in so it comes off the top line of your pay, but you can't touch it at all until you're 55 and even then there are limits.

With ISAs, your investment is from taxed income, but all growth and income in the future is tax free.

In a fund/share account, you can do what you want, but everything will suffer from CGT and/or income tax and/or tax on dividends.

Yes, you do need to worry about risk with pensions, but the main risk depends on the asset allocation of what you hold in the pension, which is just the same as for an ISA. And you also need to keep an eye on fees, but don't fixate on this such that your eye is taken off the powerful tax advantages of a pension.

Loughton_Monkey

wardrobe wrote: »

btw Monkey , my ISA's are cash

Cash ISA's have their place, but should not be relied upon for retirement planning.

Many of us - who have ended up retired early - find that in the early years, we didn't save much cash at all. Personally, I had very good pensions and was stretching myself on buying my house. Cash savings came much later.

By their nature [compounding of equity investments], early pension contributions are the most valuable.

cyclonebri1

wardrobe wrote: »

Ok, thankyou all for the responses. I will now start to save £500 a month into a personal pension, time to start looking at the different options no doubt it wont be very straight forward.

btw Monkey , my ISA's are cash

:T:T:T

Good man, but I just found it strange that you had to work that out from all the replies given, ie, no replies actually "saying don't wait, take out the pension option now"