Pensions - HELP

TraceyA84

I have paid in to a company pension for 12years in my current company (a superannuation) I am now being made redundant.
As my new employer is setting up a whole new business nothing is currently in place with regards to pensions.
I have no idea where to start (as I have only ever had one job since leaving college) and until today had no idea there was more than one kind of pension!
Could anyone offer any advice on where I start please?

Thanks x

xylophone

What kind of pension scheme did your former employer provide?

Was it defined benefit/final salary or a defined contribution arrangement?

https://www.gov.uk/pension-types

Your new employer will have to provide a pension scheme at some point.

https://www.gov.uk/workplace-pensions

TraceyA84

I think it was a final salary, whatever I paid in they matched it.
Does anyone know where I even start to look for a private pension?

Thanks x

xylophone

think it was a final salary, whatever I paid in they matched it.

Matched contributions can also be a feature of non DB/FS Schemes.

Do you have a Scheme Booklet for your old scheme?

Have you been told that you are a "deferred member" of the Scheme?

What does your new employer intend to do about a pension scheme for his staff?

Loughton_Monkey

TraceyA84 wrote: »

......Could anyone offer any advice on where I start please?

As others have suggested, your first step must be to find out the type of scheme you have just left. The word "superannuation" often implies a Final Salary scheme, but your reference to matched contributions tends to suggest it isn't.

Think of it this way. I maybe take the attitude that if my car breaks down, I will simply pay for someone to recover it and mend it. I will probably build up a fund or pot of money for this purpose so that I can chuck in £100 a year rather than shell out £700 when I break down. That's "Defined Contribution" or "Money Purchase". The money in my 'pot' may be enough for my needs, or it may not. It's the most common pension these days.

You, on the other hand, might join the AA. Of course it costs you money every year. It also costs the AA if/when they need to help you. Either way, the benefit to you is a guarantee that when you break down, you will get help. A little man will come and fix your car, or he will tow it to a garage and take you home. You will never know exactly how much that cost the AA. It doesn't matter. You got the 'benefit' you paid for. That's "Defined Benefits".

Unlike my AA analogy, though, a Final Salary scheme retains value after you stop paying in. It is "worth" money, but nobody can accurately tell you what it is, other than in words such as "£1,200 a year when you are 65, increasing by future inflation up to 5% maximum....."

So to step 2. Yes, your new employer will eventually have to facilitate a pension scheme for you (Money Purchase) but it will be very small and cost you (and them) a relatively small amount. I would strongly suggest that you consider continuing to contribute a reasonable amount of money into a pension.

To get a decent pension these days requires more contributions than most people think. Contributions made while you are young can be powerful since with compounding, the fund has a long time to grow.

Your options will be to wait for your new scheme, and make a 'sensible' contribution into that. Or start a new one straight away. You can continue to contribute even when your new employer one starts. Or (only if your existing scheme is not Defined Benefits) you may be able to contribute to your old scheme even though you have left the company.

kidmugsy

My own inclination is to think that pension contributions for most standard rate taxpayers who will not be getting an employer contribution might not be the best way to save for old age - ISAs might be better. The great exceptions would be (i) people close to or past age 55 who might suffer little or no inflexibility from having the money in a pension rather than an ISA, and (ii) people who think that they will be able to draw down tax-exposed money from the fund without paying income tax on it because their annual income will fall below the personal allowance.

A good compromise for some people would be to save into an ISA and then, as they approach 55, withdraw money and contribute it to a pension. This would also give them the flexibility to contribute to pensions after any reforms that might come along to make them more attractive to basic rate taxpayers.

On the other hand, if you are a higher rate taxpayer the pension does look more attractive than an ISA.

greenglide

On the other hand, if you are a higher rate taxpayer the pension does look more attractive than an ISA.

Salary sacrifice is attractive for basic rate tax payers as well.

Pensions rather than ISAs can also be useful for people who struggle to avoid spending the savings which are easily accessed.