Contributory v non-contributory pensions

archstanton_2

Hi, my employer currently matches my pension contributions monthly which I think means it is a contributory pension scheme? I have a job offer from a new company and their scheme is non-contributory. I think that means they pay in but I cannot? Is that correct?

Just wondering if one is better for me than another. I'm assuming contributory is better because I can add to the pension myself so it will be bigger??

Thanks for any help

jamiefly

Salary first, pension second and it's all to do with percentages. Not much good if it's only a token contribution say 2-3%. You could always run a SIPP alongside this company pension if you wish to contribute still and it's better to have two pots as opposed to one. So much more flexibility with your money in a SIPP and you can choose the risk. My wife started a SIPP last year and we have managed to turn £15k of contributions into a £26k pot and we are adding to this all the time. It's fun being your own fund manager and you can add your own personal touches like buying FCCN shares at 20p simply because the wife shops there

Shimrod

archstanton wrote: »

Just wondering if one is better for me than another. I'm assuming contributory is better because I can add to the pension myself so it will be bigger??

You need to get more details of the pension scheme. A contributory pension scheme (like you are in now) simply means that the company will not pay into the pension unless you also pay into the pension. Non-contributory means that the company will pay into the pension regardless of whether you pay - it does not mean that you can't pay, although there may be something within the pension rules that prevent this.

As Jamiefly mentions, the percentages of contribution are also important. A contributory pension with a company contribution of 10% is better than non-contributory if the company is only putting in 2%.

I would disagree with the statement 'salary first, pension second' and suggest you look at the overall packages to get a reasonable comparison.

dunstonh

I think that means they pay in but I cannot? Is that correct?

It means there is no contribution is mandatory from you. However, it does not mean the employer pays into it. They could pay 0%, they could pay 10% or whatever. Or it could be a non-contributory defined benefit scheme (rare beast nowadays).

The details of the scheme need to be known.