Nervous about starting salary sacrafice.

micklesthwaite

I wonder if anyone could help with some advice on salary sacrifice pensions.

I would like to put roughly twelve thousand a year into a pension using salary sacrifice. Now having heard of many instances where small companies went bankrupt and later their employees discovered they hadn't been making the pension contributions they claimed or had dipped into the fund to keep the business afloat, I am a bit nervous. 

1. Is it possible to take out a pension plan that the company can contribute to but that they can't access once payment has been made, in a similar way to wages paid to my bank account for example? 

2. Are there any well known plans that I should be looking at from relatively safe providers that at least cover inflation or do as well as bank interest rates ?

Thanks all

QrizB

You'd be hard pressed to find a small-company pension scheme where the employer has any access to the employee's pot.

Has your employer told you which scheme they use? Do they even offer salary sacrifice?

Marcon

micklesthwaite said:

I wonder if anyone could help with some advice on salary sacrifice pensions.

I would like to put roughly twelve thousand a year into a pension using salary sacrifice. Now having heard of many instances where small companies went bankrupt and later their employees discovered they hadn't been making the pension contributions they claimed or had dipped into the fund to keep the business afloat, I am a bit nervous. 

1. Is it possible to take out a pension plan that the company can contribute to but that they can't access once payment has been made, in a similar way to wages paid to my bank account for example? 

Unlikely that your employer will contribute to any scheme but their own, but in reality your protection is as good with that as any other. Once the contribution has been paid to the pension provider, the employer can't just help themself - the funds simply aren't accessible to them.

If the worst happened and the company went under with contributions owed from them to your pension, the National Insurance Fund can usually help: https://www.pensions-ombudsman.org.uk/faq/question-19 

Keep a regular watch on your pension pot (assuming it's a defined contribution plan - and if you are paying in 'extra' then it's likely you are paying into some sort of DC arrangement) to check contributions are being paid in as expected. If not, raise the matter promptly with your employer and don't let them fob you off.

micklesthwaite said:

2. Are there any well known plans that I should be looking at from relatively safe providers that at least cover inflation or do as well as bank interest rates ?

Thanks all

It's not the provider - it's the funds you choose to hold within your pension plan. What does your employer's scheme offer?

Mark_d

I don't think there's anything to worry about with salary sacrifice pensions.  I periodically check that the correct amount have been paid into my pension.  There has been the odd problem - where I've changed contribution level - but the employer has always sorted things out promptly.
Whilst there have been risks in the past, the current regulations don't allow the employer to dip into your pension put once the contribution has been made.

leosayer

Don't be nervous!

Pensions in the UK are setup as trust arrangements that are designed to be independent from the company and individual that makes the contributions. In other words, the company can't withdraw money they have paid in without the consent of the trustees who have a high degree of liability for carrying out their duties.

Most if not all pensions scheme should have a website where you can see what has been contributed and where it is invested whenever you like.

If you tell us the name of the pension provider your employer uses then you should get an informed opinion about them.

Depending on how long you have until retirement, it is generally desirable to aim to beat inflation over the long term (10+ years). This is why default pension funds are invested with some exposure to global stock markets. This is the only realistic way to hope to beat inflation.

Marcon

leosayer said:

Don't be nervous!

Pensions in the UK are setup as trust arrangements that are designed to be independent from the company and individual that makes the contributions. In other words, the company can't withdraw money they have paid in without the consent of the trustees who have a high degree of liability for carrying out their duties.

Much more likely from what OP has said that this is a contract based arrangement - in which case the company has no chance at all of getting their hands on the loot once it's been paid over (unless the employee opts out in the first month).

artyboy

We have come a long long way from the bad old days of Robert Maxwell!

Dazed_and_C0nfused

micklesthwaite said:

I wonder if anyone could help with some advice on salary sacrifice pensions.

I would like to put roughly twelve thousand a year into a pension using salary sacrifice. Now having heard of many instances where small companies went bankrupt and later their employees discovered they hadn't been making the pension contributions they claimed or had dipped into the fund to keep the business afloat, I am a bit nervous. 

1. Is it possible to take out a pension plan that the company can contribute to but that they can't access once payment has been made, in a similar way to wages paid to my bank account for example? 

2. Are there any well known plans that I should be looking at from relatively safe providers that at least cover inflation or do as well as bank interest rates ?

Thanks all

1.  How do you think they could access your pension 🤔 
NB.  That is completely different to the funds not reaching the pension in the first place.

2.  Unless you are relatively close to taking money out of the pension having cash in it is relatively unusual.  Why wouldn't you be investing the money?

Also, the employer is highly unlikely to pay into a pension of your choosing.  Say they have 50 staff and each person picks a different provider, nightmare for the payroll/admin people to deal with!

Sam_666

1. No, if you want something like that look at sipp.
2. That is not how pensions (which are investments) work. What you describe is basic savings account.

Aretnap

I didn't know what stories you've been hearing but the vast majority of private sector pension schemes these days, and certainly pretty much all small company pension schemes, are defined contribution schemes where the money is held by a third party pension provider and the company can no more dip into it at will than they can dip into your bank account.

There have been cases of companies going under leaving defined benefit pension schemes underfunded, and in the very distant past (Robert Maxwell) "borrowing" money from the scheme to stay afloat. However defined benefit schemes are a completely different beast, and it is vanishingly unlikely that you have found a small company which is offering you one of those.

There is a risk of course that the company won't pay your contributions into the pension each month, just as there's a risk that your salary won't get paid at the end of the month. If this happens it's usually either an administrative or technical error, or a sign that the company is about to go out of business. Either way the situation would likely resolve itself soon, one way or another. It's very unlikely that you would go for months or years with your contributions not being paid, but if the prospect worries you, check your pension statement online every month to make sure it has gone in, and raise the issue quickly with your HR department if it hasn't (just as you would if your salary didn't get paid one month).

Marcon

Sam_666 said:

1. No, if you want something like that look at sipp.
2. That is not how pensions (which are investments) work. What you describe is basic savings account.

1. Please read the answers above. A SIPP has no more protection than the scheme the employer uses for auto-enrolment (and as mentioned above, it's highly unlikely the employer will pay into any scheme other than the one they are offering to employees).
2. Savings accounts are also investments, surely?