MSE News: The great pensions shake-up: What you need to know

Jacka87

Ok, I am still confused by this and none of the questions, or very few that I am asking seem to be getting answered by anybody. Just for information, I am in my 20s and have a final salary pension scheme at work but that is now closed fror new employees and is something like 4%-6% scheme for those guys. I also have a partner who is attending uni again out of her pocket to try and get to a point where she can get a proper job. She will no doubt reach the auto enrolement figure of 8k in her parttime work over the year so is now asking me what she should do as I am the finalcial side, but I am totally lost here!

1. Who actually holds your money? is it Nest (or other providers if yours isnt provided by nest) or is it the government? Or is i your employer? Or yourself? I currently beleive it is Nest (or whoever our provider is).

2. Whoever holds your money, is this guaranteed? What of the company go bust? What ensures they contribute enough money in so that you get money back at the end?

3. I have read on occasion that you have to or can control what type of investmenst you invest in. I dont know much about pension investments tbh and I am reletaviley more in the know than many my age, including my OH, so the question is how do I decide how to invest this pension? Do I now need to pay an independant financial advisor to ask this question when it may only be a small amount of money in the first place?

4. If you are auto enrolled, yet you decide what to invest in then how does your employer or provider know what type of investment you want to invest in in first place? risky or safe or what? Surely they should ask you, and when they ask you the form could say, risky, safe or opt out all together?

5. I own a property (Mortgaged), my partner doesnt. I would liek to put a lot of my money into reducing my mortgage, I do this instead of investing in an ISA just now as it means I save more on interest than I would be paid. My OH would liek to pu money aside to act as a deposit. Money she has would earn interest until it forms deposit, any investment in autoenrolement scheme is taking away from deposit pot, either meaning it takes longer to build up to buy home and hence more money wasted on rent or it means higher ltv when she gets mortgage again wasting money. So is it even worth bothering to enrol, is the employer contribution worth it?

6. How does the cost for aministering your pension get taking off. I have read 0.5% as eing quoted, but what does this actually mean? does it mean that 0.5% of what i put into pot gets taken from me each year (seems reasonable, 0.5% tax that pension provider takes, so I save £1000 this year and they take £5) or does it mean 0.5% of all money in pot gets taken from me each year, so if I have 50k but only invest £1000 in year 51 I actually get charged £2550?

7. why does the employer get the choice of provider? If its my money and the employer gets none of teh money back then why do they even care who provides it? The best or worst provider, either suits them just the same, so if a provider, say NEST, get to employer first then they can rip us off for years and years and tak eloads of cream from our money.

Sorry I know a lot of this is probably naive but I am totally confused by all this and it seems its just totally sprung on us. Its not even plastered all over the MSE site! Just a cpl of articles that I had to search for!

Linton

Jacka87 wrote: »

Ok, I am still confused by this and none of the questions, or very few that I am asking seem to be getting answered by anybody. Just for information, I am in my 20s and have a final salary pension scheme at work but that is now closed fror new employees and is something like 4%-6% scheme for those guys. I also have a partner who is attending uni again out of her pocket to try and get to a point where she can get a proper job. She will no doubt reach the auto enrolement figure of 8k in her parttime work over the year so is now asking me what she should do as I am the finalcial side, but I am totally lost here!

1. Who actually holds your money? is it Nest (or other providers if yours isnt provided by nest) or is it the government? Or is i your employer? Or yourself? I currently beleive it is Nest (or whoever our provider is).

2. Whoever holds your money, is this guaranteed? What of the company go bust? What ensures they contribute enough money in so that you get money back at the end?

3. I have read on occasion that you have to or can control what type of investmenst you invest in. I dont know much about pension investments tbh and I am reletaviley more in the know than many my age, including my OH, so the question is how do I decide how to invest this pension? Do I now need to pay an independant financial advisor to ask this question when it may only be a small amount of money in the first place?

4. If you are auto enrolled, yet you decide what to invest in then how does your employer or provider know what type of investment you want to invest in in first place? risky or safe or what? Surely they should ask you, and when they ask you the form could say, risky, safe or opt out all together?

5. I own a property (Mortgaged), my partner doesnt. I would liek to put a lot of my money into reducing my mortgage, I do this instead of investing in an ISA just now as it means I save more on interest than I would be paid. My OH would liek to pu money aside to act as a deposit. Money she has would earn interest until it forms deposit, any investment in autoenrolement scheme is taking away from deposit pot, either meaning it takes longer to build up to buy home and hence more money wasted on rent or it means higher ltv when she gets mortgage again wasting money. So is it even worth bothering to enrol, is the employer contribution worth it?

6. How does the cost for aministering your pension get taking off. I have read 0.5% as eing quoted, but what does this actually mean? does it mean that 0.5% of what i put into pot gets taken from me each year (seems reasonable, 0.5% tax that pension provider takes, so I save £1000 this year and they take £5) or does it mean 0.5% of all money in pot gets taken from me each year, so if I have 50k but only invest £1000 in year 51 I actually get charged £2550?

7. why does the employer get the choice of provider? If its my money and the employer gets none of teh money back then why do they even care who provides it? The best or worst provider, either suits them just the same, so if a provider, say NEST, get to employer first then they can rip us off for years and years and tak eloads of cream from our money.

Sorry I know a lot of this is probably naive but I am totally confused by all this and it seems its just totally sprung on us. Its not even plastered all over the MSE site! Just a cpl of articles that I had to search for!

This is about standard company defined contribution pension schemes. I have no knowledge of NEST.

1) The money is held by the companies who provide the investment funds - the fund managers. They must keep it separately from their own internal monies so that if the fund manager goes bust the fund can carry on under someone elses management.

2) See (1). Also I believe there is a compensation scheme, as far as I know no normal investment has been lost because of the failure of the fund manager. When fund managers have run into difficulties, which some have done, their funds have been taken over by other people.

(3) & (4) There will be probably be a form sent out in which you state how you want your pension invested. Typically there will be a default fund (or set of funds) which will be OK for most people with the option of other, possibly specialist, funds. You wont need to engage an IFA unless some way into your career you have multiple pensions from several previous employers and things are getting too complex.

(5) You need to save for a house, but you also need to save for your retirement. Both are important. Any money you put into a pension now is more valuable than money you put in later because of the power of compound interest. If you leave things too late you wont be able to save enough for your retirement to fund the lifestyle you would want.

Employer contributions can vary between "nice to have" to exceptionally generous. It depends on the employer. But anything is better than nothing.

(6) The management charge is a % of the total pot. However your arithmetic is wrong - 0.5% of £50K is £250, not £2500! It doesnt appear as a bill but rather in a reduced return from the funds you have chosen. This may be subsidised by the employer or more likely come under a special deal whereby the pension scheme gets much more favourable terms than you could have got as a private investor, because of bulk purchase and the fact that your company's HR and Payroll departments are taking some of the administrative load.

(7) See (6). To minimise the cost of administration. It would cost the company much more (or be administratively impossible) to have to deal with multiple pension providers. Your pension is part of your employment package which the company provides in order to dissuade you from moving elsewhere. It's not in their interest to provide a bad deal. They gain nothing from it. Also, a company pension scheme is overseen by the Trustees. These include employee and other member representatives.

MothballsWallet

Sorry for not getting back to you sooner, james.

jamesd wrote: »

It's possible that you won't have any money deducted. Depends on the timing, the earlier you opt out, the greater the chance that it'll be before the first payroll run after enrolment.

The company I work for does its payroll runs on/before the 25th of the month - we're now about halfway through October, and nothing received yet; Saturday's post delivery is yet to come though.

I feel that something like this should have been done much better, with employers being required to introduce this properly, having representatives from whichever scheme they use coming to meet people on a much better basis.

jamesd wrote: »

For the defined contribution pensions that those in the private sector have it's the minimum age of 55 that sets when you can take the income, not an age set by the company. The 55 age may increase by the time you get there, though. And if you want to retire before that minimum age you'll need some other investments. This is part of why it's often good to use a mixture of pension and non-pension investing for retirement.

My appropriate personal pension (APP, according to the terms used when I opened it) has maintained its value and projected figures even during this recession period, and that's planning retirement at 60.

I have 2 other dormant schemes from old employer that have seen their values fell quite substantially after the recession started. Maybe they'll pick up again once we get back into growth, but I don't know: growth seems to be a long time off, depending on which paper/column you read.

Sorry for the rant

Debt_Free_Chick

MothballsWallet wrote: »

Sorry for not getting back to you sooner, james.


The company I work for does its payroll runs on/before the 25th of the month - we're now about halfway through October, and nothing received yet; Saturday's post delivery is yet to come though.

When does your employer have to comply? The whole thing is being phased in and your employer may not need to comply yet. How many people does the company employ?

I feel that something like this should have been done much better, with employers being required to introduce this properly, having representatives from whichever scheme they use coming to meet people on a much better basis.

Whilst I don't disagree, I have to ask if you've considered who should pay for this service?

My appropriate personal pension (APP, according to the terms used when I opened it) has maintained its value and projected figures even during this recession period, and that's planning retirement at 60.

I have 2 other dormant schemes from old employer that have seen their values fell quite substantially after the recession started. Maybe they'll pick up again once we get back into growth, but I don't know: growth seems to be a long time off, depending on which paper/column you read.

Sorry for the rant

Would you not keep your PP going whilst joining the company scheme too? Why would you opt NOT to receive a contribution from the company, albeit in to a pension plan that's different to your own personal plan?

NEST_Representative

Jacka87 wrote: »

Ok, I am still confused by this and none of the questions, or very few that I am asking seem to be getting answered by anybody. Just for information, I am in my 20s and have a final salary pension scheme at work but that is now closed fror new employees and is something like 4%-6% scheme for those guys. I also have a partner who is attending uni again out of her pocket to try and get to a point where she can get a proper job. She will no doubt reach the auto enrolement figure of 8k in her parttime work over the year so is now asking me what she should do as I am the finalcial side, but I am totally lost here!

Linton wrote: »

This is about standard company defined contribution pension schemes. I have no knowledge of NEST.

Just to confirm that Linton's answers stand for NEST as well.

NEST is one of the providers that employers can use to meet their new duties on automatic enrolment.

We were established to ensure that there would ALWAYS be a good-quality, low-charge scheme available for any employer to use for all or some of their workforce.

You can find out more about why the scheme was set up and what you'll get from NEST here: http://www.nestpensions.org.uk/schemeweb/NestWeb/public/whatIsNEST/contents/the-scheme.html

louiser123

i think its the most stupid idea they have thought up yet by far! it has just put everyone in one blanket scheme regardless of age need or actual requirement. how do they know which employees already have a pension and which dont? hubby has a private pension been going now for over 25 years its not linked to his employment and he pays in privatly and to be honest its pants not worth anywhere near what was projected. but the point is his employer wont have any knowledge of its existence so he could be enrolled when he has no requirement for it. also age i dont have a pension i have retirement planning in place in other means but i am now 47 and to have any chance of a decent pension from this i would have to pay in all my monthly salary so its just not a feesable option for me and i dont want it anyway.
and what angers me most is the fact that the money may be deducted and have to be refunded later which is disgusting and no way to operate anything. hell its like clarks shoes taking 50 quid out of my salary because they think i may want the latest shoes then refunding me sometime down the line when i have at last got the message through of no thanks!

stupid idea being implemented in an even more stupid and unfair way.

rant over lol

dunstonh

i think its the most stupid idea they have thought up yet by far!

Who is they?

it has just put everyone in one blanket scheme regardless of age need or actual requirement.

It hasnt. Companies are free to use a scheme of their choice. This just sets a minimum and stops companies getting out of it.

how do they know which employees already have a pension and which dont?

It doesnt matter. You can have as many as you like.

hubby has a private pension been going now for over 25 years its not linked to his employment and he pays in privatly and to be honest its pants not worth anywhere near what was projected.

Unless he increases the pension every year to keep up with inflation then it will not be near projections. They are only as good as what you pay in and too many people start pensions paying say £30pm 25 years ago and are still paying that amount today. Crazy.

but the point is his employer wont have any knowledge of its existence so he could be enrolled when he has no requirement for it.

He has no requirement for free money?

stupid idea being implemented in an even more stupid and unfair way.

rant over lol

Its a good idea that companies are being made to pay into it.

louiser123

dunstonh wrote: »

Who is they?



It hasnt. Companies are free to use a scheme of their choice. This just sets a minimum and stops companies getting out of it.

i wasnt talking about the company i was meaning the individual who is being opted in. im 47 now to get any decent pension pot i would have to pay in a large % of my salary which i neither can afford nor wish to contribute.

It doesnt matter. You can have as many as you like.
and each one after leaving employment and having to begin another will be just as worthless as the rest.


Unless he increases the pension every year to keep up with inflation then it will not be near projections. They are only as good as what you pay in and too many people start pensions paying say £30pm 25 years ago and are still paying that amount today. Crazy.

he has increased to what we can comfortably afford but it is still a poor show.

He has no requirement for free money?

nothing is free my dear not in this lovely world we live in. i would have thought most people knew that by now!:eek:


Its a good idea that companies are being made to pay into it.

maybe maybe not i can see many employers making up for it in other ways like cutting staff or cutting corners

dunstonh

i wasnt talking about the company i was meaning the individual who is being opted in. im 47 now to get any decent pension pot i would have to pay in a large % of my salary which i neither can afford nor wish to contribute.

Seeing as it would beat any other option going, that suggests you intend spending 20-30 years in poverty in retirement with no savings or anything. Yes, it may not make much difference but when you are planning to live on virtually nothing then small amounts would make a difference.

and each one after leaving employment and having to begin another will be just as worthless as the rest.

You can consolidate them. These things are only as good as the amount you pay into them. If each is worthless it means you never put any effort into it. However, that doesnt mean you should turn down free money.

he has increased to what we can comfortably afford but it is still a poor show.

How much is he paying? £200pm £300pm what?

maybe maybe not i can see many employers making up for it in other ways like cutting staff or cutting corners

In the short term you are probably correct. Although with most employers being aware of this

ferox666

Interesting that the "experts" have not commented on OrganicFarmer's post on page1...hmm...