Is it worth sticking with my pension

sheffwed

Just looking for some advice, I've will soon have been with the pension scheme for 2 years i still have a small window in which to pull out of it and get a refund of my contributions.
I’m 23 currently earning around £24K, I’m a member of my works pension BAE systems level 100+. As far as I understand it there are two parts to the pension
1 Core pension - a final salary pension where it is 1% for each year of service
2 Retirement account – 2% of salary paid in by the company + any investment returns.

I have to pay 4% of my salary for the core pension. Is this a good pension deal or are there better ones or better ways of investing at my age?

This pension is a sub-set of BAE systems main pension scheme, which on the last valuation had a £2.4Bn deficit of which £1.4Bn was unplanned.

Would it be wise to get out whilst I can?

Any help would be much appreciated.

Thanks

EdInvestor

Hi sheffwed,

Just on the security thing, there is now a pensions protection fund in place to look after future problems with final salary schemes. Also IIRC BAE has taken steps jointly with unions/staff to sort out its deficit.

IMHO it's less likely there will be major problems with big FTSE companies' schemes like BaE or BA, where the deficits are well known and City analysts (not to mention staff and the media) are watching the matter.

It's more likely to be the obscure little companies out in the sticks where you have problems like directors doubling as trustees and transferring out massive sums into their own accounts shortly before the fund goes into windup, shortchanging everyone else. :mad:

Nevertheless, the more pension scheme members wise up and pay attention to what's going on in their scheme, the less likely they will experience a nasty surprise.Apathy just encourages bad behaviour by any management.

I'll leave others to comment on the virtues of the particular scheme, but in general it's IMHO worth going for a pension where there's a company contribution, but if there isn't one, young people will often be better to focus on paying off debt and saving up (in an ISA)to buy a home.

dunstonh

Deficits are there due to new accountancy requirements which many are now saying are over cautious. We have also had the stockmarket crash which has yet to recover to its previous high point. Over time, that will happen. So deficits with major companies shouldnt concern you that much.

The benefits of your occ scheme would cost you 10-15 times more if you were trying to obtain the same benefits with a personal arrangement.

Pal

EdInvestor wrote:

It's more likely to be the obscure little companies out in the sticks where you have problems like directors doubling as trustees and transferring out massive sums into their own accounts shortly before the fund goes into windup, shortchanging everyone else. :mad:

This is highly unlikely to happen in future (and hardly ever happened in the past). The Pensions Regulator has new powers to unwind any such dealings where it is deemed that other member's (or more particularly the Pension Protection Fund) lost out as a result.