Are company pension schemes compulsory?

lifebegins

I am soon to start work for a very large multi-national company with it's own contributory pension scheme, but I have been paying into my own stakeholder pension and would prefer to keep this one going instead.

This is because I am not planning to work for this company for more than a year or two (career reasons) and don't want another tiny pension pot I can't do anything with.

(I have a pension from a job I did for 3 years, many years ago, and each annual statement shows the value eroded by charges : furthermore they would take over half the fund in charges if I moved it somewhere else).

So my question is, do I have to join a company scheme, or can I ask the company to pay my contributions into my stakeholder scheme? Are there any rules governing this?

I don't want to seem difficult by asking the company before I start, without having a good idea of the situation first.

Thanks for any advice.

Retired_I.F.A.

I am soon to start work for a very large multi-national company with it's own contributory pension scheme, but I have been paying into my own stakeholder pension and would prefer to keep this one going instead.

big mistake

This is because I am not planning to work for this company for more than a year or two (career reasons) and don't want another tiny pension pot I can't do anything with.

the pot would amount to approx twice that which would be in your stakeholder after a year and can be transfered into your stakeholder when you leave

(I have a pension from a job I did for 3 years, many years ago, and each annual statement shows the value eroded by charges : furthermore they would take over half the fund in charges if I moved it somewhere else).


If that were a money puchase plan yes it would be eroded by charges of about 1% maybe 2% a year but would grow with investment returns far exceeding that over the long term.

If it were a final salay scheme it would not be eroded as future charges for investment etc were all included when it was made "preserved". Over the long term though it would grow by less as the growth also was estimated and fixed when preserved.

Transfering costs 5% maybe 6% at the very very most of the true value of it at the time of transfering which is the value shown in annual statements in the case of a money purchase plan and with final salary schemes the schemes actuary calculates it when it's asked for.

In either case it's a long way off 50% where do you get that notion from?

So my question is, do I have to join a company scheme, or can I ask the company to pay my contributions into my stakeholder scheme? Are there any rules governing this?

Under the law No you dont have to join. Yes you can ask them to contribute to you own plan but they dont have to if they dont want to.

I don't want to seem difficult by asking the company before I start, without having a good idea of the situation first.

Thanks for any advice.

Join it, you'd be a mug not to unless they'd put a decent contibution into your own stakeholder and you have more chance of growing wings of that happening.

Also seek out an IFA and ask about transfering your previous pension pot not to the final salary scheme as there is no tue benefit in doing that as the employer wont add anything to the amount but to a stakeholderm be it your own or a new onem or a personal pension. He will analyse it and tell you if transfering it is advisable or not.

dunstonh

This is because I am not planning to work for this company for more than a year or two (career reasons) and don't want another tiny pension pot I can't do anything with.

The country is full of people with the intention to do 1-2 years but are still there 10 years later.

You can do something with the pension so that isnt an issue even if you only do 1-2 years.

(I have a pension from a job I did for 3 years, many years ago, and each annual statement shows the value eroded by charges : furthermore they would take over half the fund in charges if I moved it somewhere else).

It is highly unlikely to be eroded by charges as charges are typically 1-1.5% per annum nowadays. It is more likely due to where it is invested. Money purchase employer schemes rarely have any transfer penalties. Final Salary schemes dont have a fund value so you wouldnt know if you are getting half or full as it doesnt work that way.

So my question is, do I have to join a company scheme, or can I ask the company to pay my contributions into my stakeholder scheme? Are there any rules governing this?

Rules change in 2012 but at present you dont have to join and take the free money from the employer and they dont have to pay into your own pension.

vivatifosi

Hi lifebegins,

Retired IFA and dunstonh have both given you excellent advice here.

From the other side of the fence, I am a trustee of a final salary pension scheme and nothing makes me sadder than talking to people who are now regretting not joining this or its replacement scheme - and yes, they are often the ones who thought they would be there a year or so and are still there 10 years later. Unlike you, they frequently haven't paid into anything else by the time they join, and comparing their statements a year after joining late to those of their colleagues who joined 10 years prior really frustrates them.

As both IFAs say, its free money from your employer, nobody would turn down a 5% payrise or whatever the percentage is, and it still surprises me after doing this for several years that people turn down pension contributions.

Please speak to an IFA. You may also want to speak to your Trustees or pensions administrator (whoever is appropriate for the way your scheme is run, as a larger scheme they may have someone in house). While we don't give people financial advice as it is not our role, trustees should be able to advise you on the specific mechanics of your scheme and its portability. And yep, you'd have more chance of growing wings than getting us to pay into your own scheme...

Retired_I.F.A.

if lifebegins doesn't come back now and say... "wow I never realised that it was effectively free money" I'm gonna drink Red Bull till I grow wings.

jamesd

lifebegins, will the company add any of its own money to your contributions? Perhaps matching them?

dunstonh

Did you like my little emphasis on free money given our recent discussions?

Retired_I.F.A.

hehehehe, and mine in effectively?

dunstonh

Yes. I saw that.

However, this thread does highlight the point that sometimes you have to put it that way to people for them to realise what they are missing out on if they dont join.

I know we dont know 100% for sure that there are employer contributions here but a few assumptions can be made based on the way the OP posted which suggests there is.

Paul_Varjak

Good to see that we now have two people who know what they are talking about!

lifebegins

Thanks for all the advice guys.

It looks like Retired IFA will be drinking a lot of Red Bull:beer: !

I DID know it was effectively free money, but wasn't sure if my employer would give me their contribution anyway (I think it's 5%) to put wherever I liked, or would only contribute to their own pension fund.


I've quite a reasonable fund in an employer's scheme from 7 yrs in my last job, and a stakeholder pension I've been paying into while I've been at home with the kids, but my BAD pension, was from my very 1st job after college:

Pearl with -profits "Prosperity":rotfl: Plan:

From the last statement I can find (2006):

Amount in plan : £3922

Transfer value if moved your fund to another plan:£ 1416

I reckon that's 63% of my fund they keep in charges!!!


My first job (at 21yrs old) was for a small company with no plan of their own, who made no contributions for a pension. With my jub offer letter, my new boss included details of his brother, a Pearl pension adviser, and suggested I contact him. Being young and naive I didn't want to offend him , so went ahead and signed up with his brother. My contributions were small but I wasn;t earning much and was skint at the time so it felt like quite a lot!

I suppose I should see someone (I just got my stakeholder off the internet with the same big company I have an ISA with) but I was put off by this experince.


I'm sure you IFAs must despair!