Shall I join company pension?

Southend1

Eric_the_half_a_bee wrote: »

A fair point, but the figures suggest that the OP is earning more than the state pension now. So, if he/she cannot afford food and heating now, what is the expectation upon retirement?

Poverty and misery I would imagine, as is the expectation for thousands of pensioners in this country!

atush

Wjher dies the OPsay they cannot afford to eat and heat now?

alexanderalexander

Southend1 wrote: »

Sorry I don't have any figures, I'm not that clued up about it to be honest. I'd be interested to see some examples too. But HB and CTB alone for 20-30 years of retirement could be worth a fair bit. Not a lot of scope for investment growth if OP is 5 years from retirement.

I will admit that I am not clued up about it either, but I still think that it's rather unlikely that the amount lost in benefits will exceed the amount gained in having the pension. You wouldn't have HB and CTB scrapped completely due to a minuscule pension pot -- it would surely just be decreased incrementally.

PeacefulWaters

victoria61 wrote: »

I have run my own business for 5 of the last 7 years and haven't contributed to a private pension during this time. Prior to this I worked for the local authority and have a small final salary pension I can take in 8 years.

The company I work for now have written to me today to say that they are enrolling me in the pension scheme with effect from 1st April unless I opt out. I only plan to work for another 5 years and am wondering whether it's worth me joining the scheme? It looks quite good on paper - I contribute 3% and my employer contributes 12%. I've worked out that will give me a pot of about £20 000 in 5 years time. What would my options be with such a small amount? Presumably any annuity i managed to buy wouldn't be worth having? The scheme is with Legal and General.

I would really appreciate any advice, thanks

You pay in £3,200 of your net pay and end up with a £20,000 lump sum. Let's say that buys a £600 income for life (lots of reasons why it could be more than this).

Why wouldn't you do this?

Southend1

alexanderalexander wrote: »

I will admit that I am not clued up about it either, but I still think that it's rather unlikely that the amount lost in benefits will exceed the amount gained in having the pension. You wouldn't have HB and CTB scrapped completely due to a minuscule pension pot -- it would surely just be decreased incrementally.

I wouldn't have the confidence that the system is that logical myself.

Can't believe all these people just saying OP should join the pension without checking out the implications first. Seems a little reckless.

[Deleted User]

Thanks everyone for your replies. I won't be claiming any benefits in retirement (apart from the state pension of course). We own our house and my husband has a company pension as well. At the moment with my small final salary pension and my expected state pension (although I know that could change in the next 10 years before i get to claim it), I would have a personal income of about £9000, so was thinking that adding a small company pension might take me above the tax-free allowance and consequently negate the small benefit i might gain from it. I know this is all speculation but income is tight at the moment so before I pay in about £70 per month I want to be sure it will be worthwhile.

We're not struggling to pay the bills or anything - just conscious that as I'm hoping to semi-retire in 5/6 years I want to ensure I am putting my money where I will get the best return. I think I probably will enrol in the pension. Should have done it earlier really, it does seem a bit of no-brainer.

dunstonh

so was thinking that adding a small company pension might take me above the tax-free allowance and consequently negate the small benefit i might gain from it.

So what if it does? It is still better than nothing and a small amount of tax applied doesnt negate the gains.

I know this is all speculation but income is tight at the moment so before I pay in about £70 per month I want to be sure it will be worthwhile.

If it is tight now, then what is going to be like in retirement when you earn less?

I want to ensure I am putting my money where I will get the best return.

Nothing beats free money from employer.

kidmugsy

For heaven's sake, people, do the ruddy arithmetic. The investment would be a rip-roaring success on the basis of the tax-free lump sum alone; she could give the pension to charity for all it matters.

Southend1

kidmugsy wrote: »

For heaven's sake, people, do the ruddy arithmetic. The investment would be a rip-roaring success on the basis of the tax-free lump sum alone; she could give the pension to charity for all it matters.

Yes, but people do keep repeating this without knowing whether the OP would stand to lose more in social security than she would gain from the pension.

Though it does seem in this case that OP will not be in a position to claim HB/CTB etc so she really should join.

My issue is more that people keep advising that the pension is definitely the right way to go without checking OP's individual situations. I suspect there may be some people within 5-10 years of retirement for whom having a small private income would cost them money in lost social security payments in the long term. It really would be interesting if anyone in the know had some figures on this.

atush

And why are basing advice on benefits that may not exist in 20+ years?

With a 12% employers contribution, my advice would ALWAYS be to join the company pension.