pension payment

helzapoppin

my mate who works for a small company has just introduced a new pension plan with my mate paying 1% contribution and the company paying 1% contribution is this a good pension plan or would he be better off to opt out.

McKneff

Well if he opts out, he will get absolutely nothing from his company. Bit daft saying No Thanks to free money.


He could alwys put more in out of his own pocket. He wont be restricted to 1 per cent.

Linton

Paying equal contributions is good, but 2X1% is nowhere near enough to set oneself up for a comfortable retirement. If your mate put in 5% or more would the employer match that?

jamesd

What is the pension plan? Roughly how old is he close to or over 55 is the main thing to be interested in.

They aren't all the same and there are a few lemons out there, notably the leading one for employers who don't care enough about their employees to find something better, NEST.

dunstonh

helzapoppin wrote: »

my mate who works for a small company has just introduced a new pension plan with my mate paying 1% contribution and the company paying 1% contribution is this a good pension plan or would he be better off to opt out.

Its not great but its better than nothing. Opting out will mean:

1 - He misses out on "free money". (the 1% from employer and the tax relief)
2 - His choice to take out pensions elsewhere would be restricted as many will not transact with opt outs unless via an adviser (and an adviser is unlikely to recommend he turns down free money)

helzapoppin

my mate is age 40 so he will have to pay in extra money to the plan what percentage would he have to pay. I don't know which pension plan he has.

jamesd

The plan it is is very important. If it's NEST, say, I'd say put in just enough to get the employer match and put any more pension contributions into a personal pension instead.

How much he needs to pay in depends on his desired income in retirement and when he wants to retire. There's no fixed answer that is right, just some guidelines for those who don't care enough about retiring or retirement income to do it right. One of those guidelines is to take the starting age and halve it then put that percentage of gross income in, including employer contribution and tax relief, until reaching state pension age.

FatherAbraham

helzapoppin wrote: »

my mate who works for a small company has just introduced a new pension plan with my mate paying 1% contribution and the company paying 1% contribution is this a good pension plan or would he be better off to opt out.

By participating the pension scheme, he's getting an immediate 100% return on the money he contributes. He would be far worse off if he opted out.

Warmest regards,
FA

Gram_Parsons

What's the viewpoint on The People's Pension from B&CE? That's who my work pension is with. Think it was roughly a year ago we were auto enrolled. I upped my contribution from a measly 1% to 5% but my employer weren't prepared to increase their side.

System

jamesd wrote: »

notably the leading one for employers who don't care enough about their employees to find something better, NEST.

What exactly is wrong with NEST?
We were advised by our IFA that this was the best for a very small company to use, because it was virtually the only one that catered for a membership of less than 10 employees, and had low charges.

The standard funds may be a bit over-cautious, but there are more adventurous options for anyone who wants.

dunstonh

What's the viewpoint on The People's Pension from B&CE?

Its another basic option aimed at small companies. If its what your company has chosen then an opinion doesn't matter as its what you go with to get the free money.