How do company pensions work?

Lokolo

Russe11 wrote: »

what about Housing Benefit, council tax benefit, pension credit, winter fuel allowance, bus pass, social care and so on... £5600 is just the cash element.

realistically you would need to build up a very large pension pot to exceed the means tested elements.. HB, CTB and pension credit. The HB can be ignored should you own a property.

now the govenment guidlines when I was 20 was £300 a month, not 8 years later the advice is £400 a month...

currently I wish I worked for a company that would 5% match.

Brilliant idea. Don't bother and scrounge off the goverment.

McKneff

King_Mustard wrote: »

Most of that confused the hell out of me.

I'm not a career person - I'll probably continue having 1-6 month jobs.

I'll probably just stick with my state pension. Less complicated for someone like me who moves jobs a lot.[/QUOTE

You must be nuts, do you actually realise that so many pensioners are living hand to mouth these days on a pension of £107 per week.

If you dont opt into a pension scheme in which you employer pays money, you are saying 'No Thanks' to all this free money, No Thanks to all this tax relief and Yes Please to a 'heat or eat' choice when you retire. If indeed there is a state pension when you retire.

dunstonh

Well I'll open a savings account next to my current account and put money in there.

You will need to put around four times more than you would in the pension to get the same sort of amount (and that is ignoring any employer contribution given up - you could end up needing to pay around 20-25 times more into the savings to match the pension)

See, this is all so confusing! So many terms and plans - no wonder young people don't bother.

There are more types of savings account than there are types of pension. Its not difficult as long as you give it sensible time. For most people, their pension is their second biggest or even biggest purchase in their life. Yet they give it less time than buying the latest mobile phone.

kidmugsy

King_Mustard wrote: »

See, this is all so confusing! So many terms and plans - no wonder young people don't bother.

Yeah, just as they don't bother with mobile phones either.

kidmugsy

Lokolo wrote: »

Brilliant idea. Don't bother and scrounge off the goverment.

You can't scrounge off the government - you scrounge off the taxpayers.

atush

Mustard, it isn't rocket science.

A pension is good because: for each pound you put in your employer will also (in some cases even more than a pound). We call this FREE MONEY. Which you want. Because having free money is better than no money.

Then there is tax relief. IE you don't have to pay income tax on the money you put in your pension. So you save whatever % tax you are currently paying.

So, say you put 40 quid in your pension. Your employer puts 40 quid in. Then the taxman adds 10. We dont want to confuse you further, but depending on how your employer sets up the pension you might save National insurance too and up it even higher.

So for 40 quid, you have 90 in a pension pot. If you put that SAME 40 quid in a savings acct, you'd have just 40 quid.

So join the pension as you have already wasted a decade. Any money you put in 10 years ago would have grown and the longer the money is in your pension the longer it has to grow.

Anytime you move jobs, just move the money to new pension, or open a personal pension and transfer there.

You should still open a savings acct, and aim to save 3-6 months spending (ie your monthly outgoings) so that you have a cushion for emergencies. This is in addition to your pension- which is not a savings account so much as a way to provide for yourself in old age. The current SP is around 5000. Could you live comfortably on this?

A good thing about any work or Private pensions you invest in, is that they can pay you an income and a lump sum years before your state pension begins. Under current rules, this could be as early as age 55.

King_Mustard

ok, I now understand the advantages of a company pension.

Since I move jobs often, is it easy to get the money from one and move it to the next? What if it takes 6 months to find a new job? Does the money stay with the original company until I get a new one, or do I "withdraw" the "money" when I leave that inital job?

What exactly is a SIPP? Will that makes it easier for someone who moves jobs often?

dunstonh

Since I move jobs often, is it easy to get the money from one and move it to the next?

In most cases yes. However, with some types it is actually better to leave them.

What if it takes 6 months to find a new job?

it makes no difference.

Does the money stay with the original company until I get a new one, or do I "withdraw" the "money" when I leave that inital job?

They stay there until you say otherwise.

What exactly is a SIPP?

It is an advanced pension contract designed to be used by experienced investors wanting advanced investment options. Don't take this the wrong way but its not you.

Will that makes it easier for someone who moves jobs often?

No.

atush

I agree, ti doesn't sound like a SIPP is for you.

But it could be when you learn more about investing some time in the future.