Company Pensions 2012?

Melmar

Am I right in thinking that all companies will have to provide a pension scheme to their employes in 2012?

If this is the case when in 2012 does this come into force and do you think that these pensions will be worth having if companies are being forced. Would I be better off getting a private pension or even just saving the money in an ISA.

Thanks in advance :think:

hugheskevi

Am I right in thinking that all companies will have to provide a pension scheme to their employes in 2012?

Not quite.

It depends on the size of the company. The largest companies have to provide pension contributions (unless the member opts out) from 1st October 2012, but it isn't until 2016 that the smallest companies get covered by the new rules.

If this is the case when in 2012 does this come into force

The timeline is here.

and do you think that these pensions will be worth having if companies are being forced.

The money can only be taken as a pension - the employer cannot induce you to opt-out by offering you higher salary for example.

Therefore, in most cases it will be best for employees to remain in the scheme.

But, the statutory minimum contribution rates are very low, and many employees will need to save more if they want an adequate pension.

Would I be better off getting a private pension or even just saving the money in an ISA.

You will almost certainly be best off remaining in the scheme.

You should consider additional provision on top of this, be it personal pension or ISA, depending on your requirements.

dunstonh

Would I be better off getting a private pension or even just saving the money in an ISA.

One option gets an employer contribution, the other doesn't. Which do you think will be best?

Melmar

Ok thanks for the replays, from the advise given it looks like its best to be in the company scheme. My next question is. The company I'm in has less than 50 people so it looks like they don't need to do anything untill the end of 2014. What would be the best thing to do as a stop gap between now and then?

Gatser

I would suggest that you should only start up a private pension if you are already saving the maximum into an annual ISA and/or you are a higher rate tax payer.

This is a personal opinion of course, but I feel that too many 20% tax payers, contribute to private pensions with no employer contribution, and have unrealistic expectations as to what they will get out at the end.

You should work out what you can afford to save and what you expect to get back... then check out (on here if you wish) that your calculations are realistic.... you will reduce the risk of disappointment in later years

Good Luck!

hugheskevi

The company I'm in has less than 50 people so it looks like they don't need to do anything untill the end of 2014. What would be the best thing to do as a stop gap between now and then?

Don't look at this as a stop-gap.

Between 2012 and 2017 the statutory minimum contibutions are phased in, so it is not until 2017 that they reach the full amounts.

Even then, the minimum will be 8% on a range of what is called banded earnings. That means you don't get anything on the first £5,035 of earnings. Hence if you earn £25,000 then £1,597 (or 6.4% of total income) will go into the pension.

Just because there is a pension, does not mean it is adequate - for a 30 year old with no pension saving, 6.4% will not come close to a decent pension.

Therefore, in your position I would be looking at whether your long term saving is best done in a S+S ISA or a personal pension (which will depend on whether you receive tax credits, whether you are a higher rate taxpayer, whether your employer offers salary sacrifice and your level of financial discipline).

Then work out how much you need to save, using tools such as this calculator.

Once 2014 comes around, you can review the position, and reduce contributions if necessary to reflect the extra employer saving.

atush

Basically, you need to SAVE as much as possible in the next 5 years, be it in a pension, ISAs or NSI products or general savings accts.

Consider a pension if you have filled all the tax wrappers available to you such as ISAs.

JoeCrystal

Gatser wrote: »

This is a personal opinion of course, but I feel that too many 20% tax payers, contribute to private pensions with no employer contribution, and have unrealistic expectations as to what they will get out at the end.

I certainly do not have any employer contribution sadly. It is always worthwhile to save into a pension for retirement after all. Well, realistic expectations are often matched with realistic contribution. Which is why I am paying in quite fair share of my income into my pension scheme.

Melmar, it might be worth setting up personal pension anyway, maybe you can visit few IFAs to see what the options are? Any idea how much you are hoping to contribute into and secondly, how long you are hoping to work before you retire. The earlier you start, the less you can pay in to get same amount of income.

hugheskevi

It is always worthwhile to save into a pension for retirement after all.

This is true.

But it may well be considerably better for an individual to save in a S+S ISA and later move the money to a pension as and when they have the advantage of higher rate tax or salary sacrifice.

Melmar

Which would be a better investment - a SIPP or an S and S ISA?

jem16

Melmar wrote: »

Which would be a better investment - a SIPP or an S and S ISA?

Neither. Both are simply tax wrappers and the investments within will perform exactly the same. The only difference will be how the tax is handled.

Main idea is to use the pension wrapper to take advantage of the 25% tax free lump sum plus to use up and personal allowance ( roughly £10k for over 65) after the state pension. Then use S&S ISAs.

The above depends on your tax status - ie it's always a good idea to use the pension wrapper if you are a higher rate taxpayer whilst working but basic rate in retirement. It also depends on employer contributions or salary sacrifice schemes where it is an advantage to use the pension wrapper.