MSE News: Automatic pension enrolment - what it means for you

scruffian

I am in a situation where I already have a stakeholder scheme with a low commission and good terms, but my employer doesn't contribute. When my employer is forced to offer a pension to me (2015) will I be better off to transfer my existing pension into my employers one (which will almost certainly have a higher commission), or to keep it, but start contributing to the employer one instead (because I get their contribution too), or to just stick with what I have (I can't see a difference in 1% or 2% commission making a massive difference).

Or is there an option to get my employer to pay the same contributions into a different scheme?

Linton

scruffian wrote: »

I am in a situation where I already have a stakeholder scheme with a low commission and good terms, but my employer doesn't contribute. When my employer is forced to offer a pension to me (2015) will I be better off to transfer my existing pension into my employers one (which will almost certainly have a higher commission), or to keep it, but start contributing to the employer one instead (because I get their contribution too), or to just stick with what I have (I can't see a difference in 1% or 2% commission making a massive difference).

Or is there an option to get my employer to pay the same contributions into a different scheme?

Only if they want to, and most wont because of the complexity of the administration.

You may find that your employer's pension charges are lower than your stakeholder as companies can make bulk purchase deals with the pension suppliers. So you need to assess the details of each scheme to determine whether a transfer is worthwhile.

mania112

dunstonh wrote: »

Merge the pensions then if that is the case. Only a fool would not join your pension scheme.

Love it

trippy

Clicked on this thread to see what people were saying about Auto Enrolment.

I've nagged people until I'm blue in the face about pensions. It would be wonderful to give people a crystal ball so they can see how difficult it will be in retirement. I just tell them that so long as they don't make me feel guilty when I have the retirement I've planned for.

I understand how people struggle to grasp the importance of pensions, but it's neither big nor clever to declare that you plan to sell your house and live off that whilst simultaneously demonstrating that you don't understand the concept Auto Enrolment.

This is not directed at anyone in particular, it's just a general observation. <goes to bang head against the wall>

DavidLaGuardia

Kite2010 wrote: »

Put in 0.8%, get 1.2% free from employer & from tax-man, lose ~ 1% in annual "management" fees (from my employers' page on costs for pensions).

Sorry mr government man, I will keep the 0.8% and invest it into a nice ISA and play the savings account switching game every year or so to maintain a good interest rate.

This kind of asinine comment makes me realise how much financial planning basics need to be taught in schools.

Pont

God in Heaven! Pension schemes leave a nasty taste in the mouth for those of us old enough to remember Maxwell et al. 'Forceable' pension schemes taste even nastier IMO.

At this time, when many are struggling with escalating fuel bills, food costs etc, even a small percentage of ones wage being taken 'forceably' is robbery!

So long as we're in a position that the more you pay in - you'll still receive back the same amount as those who have chosen to p&%^ it all up against a wall - nothing will change.

If however, those who pay into a pension scheme will receive the same as those who chose to p&%^ it all against a wall PLUS what they've paid into a pension, maybe it will work.

To me, who pays approximately £200 per month into mine, where there's a scheme there's a schemer!

jamesd

Shelle wrote: »

My employer only contributes 1% no matter how much I myself contribute. I have not had a payrise for 4 years (and a possible 5th year coming up). Looking at the figures for the NEST scheme it seems that although the employer only contributes 1% to start off with, it will increase by 2018 to 3%. Thus it seems that I would be better off with the NEST scheme!

You're mixing up two things here, auto-enrollment and NEST.

All auto-enrollment schemes are required to comply with the minimum funding requirement. So if your employer uses your existing scheme to comply, it will be required to increase its contribution.

NEST is the lemon out of three schemes specifically set up to help with auto-enrollment for employers who don't have a pension scheme and don't want to pick something else.

Shelle wrote: »

I do sometimes wonder whether I am better off in a private pension outside the company??

If the company is paying anything, probably not. If it is paying nothing then maybe, depending on the charges for the investments you want to use and whether those investments are available in each.

Eellogofusciouhipoppokunu

Eellogofusciouhipoppokunu wrote: »

Whenever I see a post like yours I always ask the following question: "So what are you doing to provide for your retirement income?".

I rarely if ever get a reasonable reply but I live in hope.

Still no reasonable reply. To be expected I suppose, but it's a shame because I'd love a good debate about the pros and cons of different retirement vehicles ratehr than the usual trite declarations from some that "pensions are a rip off", "you'll lose your shirt and have nothing" and the always popular "I like to be in control of my money, I'd rather have just £1000 in a mattress than have £50k in a pension fund and have to pay all those fees!!!"

Tom_Brine

Hi there I too would like an actual debate on this my earlier comment

Based on earning £20k for the new enrolment scheme

If, over those 40 years, there was an average 3% a year return on the funds in which the contributions were invested, then the retiree would end up with a pot of £88,488.
According to the Money Advice Service, at the current historically low annuity rates this would provide a man in good health with an inflation linked annual pension of as much as £2,714 a year, or £226 a month.
£226 a month!!!!! for an investment of £96.24 for 40 years. How long will you be retired for? 15-20 years (20 will be the maximum as pension age is increasing). Lets say 20 years, you take from the pension £54,240. It does not matter that your pot is £88,488. You take out £54,240 before you die. Leaving £34,248 for the administrators of the scheme, on top of their fees over the years.

You have paid in over 40 years £46,195.20. A quick check of the savings calculator shows that if you pay £96.24 for 40 years with 3% interest.......

After saving £96.24 a month for 40 years and 0 months, you will have £77,124.07 in savings.


It seems you will have a lot larger pot to take from. The pot itself is not larger but you can access the money as and when you like as well as earn interest that you can access the second it is earnt. Split equally without taking interest into account you have £321 a month, plus interest on the lump sum sat in your account. which is £95 more a month than the pension scheme in cold hard spendable cash.

This (perhaps simple) view point says to me that saving the money would be better for my retirement as I would have access to more per month in my old age.

Daniel_Elkington

I forget the 'property guru's' name, but when you move out and rent three rooms you will have to apply for the house to be classed as a house/building with multiple occupancy, which costs about £1000 in architects fees and about £1500 in local authority fees to get planning (possibly more depending on where you live). If you don't then you are letting rooms illegally.

Of course you could contrast the amount you invested into the property in order to pay off the mortgage (many hundreds of thousands of pounds) with the amount you paid into your 'useless' pensions (probably about £10K ish) and then realise that 'you get out what you put in'.

I'm not criticising your decision, your path is a perfectly valid one and many people make it work and make it work excellently. I'm trying to help you realise that no investment is fundamentally better than the other.

Go for the property thing, good luck and I wish you all the best, just please don't put people off saving for retirement through anything other than property - property can go drastically wrong too!

And the guy who worked out the cash thing was wrong, you don't get tax relief or employers contributions into cash.

On auto enrolment you pay 4%, 1% tax relief and 3% employer.

So you put in 4% and get an instant 100% return - where else is this possible?