new employer, new pension?

raeble

My previous employer was a member of the local government pension scheme. I paid into that for six years. I'm about to defer the benefit (freeze it) instead of transferring it into my new employers pension scheme because I don't like the sound of it.

My new employer is a university who has closed their final salary pension scheme to new members. In it's place they have set up a stakeholder pension with freinds provident. The university pays double your contributions into the scheme, up to a maximum of six percent of your salary (12%). My problem is a I don't understand the stakeholder business and I don't trust it. I trust even less when I found out that they don't guarantee that you'll get back what you put into it.

I don't remember the LGPS ever making that statement, but I could have missed a mailshot. It does worry me that I'm paying into a scheme and I'll end up worse off than after 41 years of paying money into a scheme than I would be if I put it into a high interest account.

Should I look at getting a person pension or is that the same as a stakeholder pension. Am I worrying about nothing with the scheme that my employer is offering. I must admit to feeling uneasy about paying into something like that.

dunstonh

A final salary scheme is a proper occupational pension scheme with the retirement income based on years of service and level of income.

A stakeholder is a low cost personal pension which is based on investing in funds which you hope will grow enough over the term to build up a decent fund to buy an annuity.

You obviously wouldnt transfer a final salary scheme from the local government into a stakeholder. However, 6% each into a stakeholder isnt bad and you should take them up on it.

Remember that you are getting 6% from the employer and upto 40% from the Govt (22% if basic tax payer, 40% if higher rate). So, in simple terms the contributions would need to lose 46% for you to be any worse off. Extremely unlikely over 41 years.

Pal

Do you mean that the university will pay a maximum of 6% if you pay 3%, or that they will pay a maximum of 12% if you pay 6%?

If it is the latter, that is a reasonably good contribution rate. In your position I would pay the maximum 6%.

raeble

Yes I mean the latter. However three percent of the employers contribution will go towards health insurance and life assurance - which I don't actually want but it looks like I'll have to accept that if I take out the pension with the university. I'm going to freeze my final salary scheme, I've just got to post the letter off.

Thanks for clarifying everything.