Final salary pension badly performing

Toddy

Hi,

the company I work for where I have a final salary pension have anounced that they are massively underfunded simply because people are living longer.

Each year the current employees are asked to increase their contributions which as I see it is to fund those already in retirement.

I am looking to invest in another independent scheme away from my Employers pension. Can I have another pension running parralell with this or does anybody have a good idea of how I can invest for my retirement anticipating my final salary pension scheme to collapse.

Many thanks

dunstonh

If you leave the final salary scheme, you will find it hard to set up a personal scheme as this would be considered a mis-sale. Even if you do not seek advice and go direct, a number of providers are now rejecting applications from non-joiners.

The new accountancy system for pensions is regarded by many to be very over cautious and as a result has increased the shortfall amounts in many pension funds. A shortfall does not mean that the scheme is going to collapse. When you couple this with the stockmarket crash a few years ago, its pretty understandable why many schemes are in deficit. This deficit is currently going down.

Final salary schemes are generally regarded as the best option available for the employee. They generally give the most income for the least personal contribution. With hindsight, it is clear that people were not paying enough in to get the benefits out at the end. This was masked in the past with the days of high inflation/boom bust economy etc allowing funds to grow very fast plus people only lived on average a couple of years after retirement.

Don't write your occupational pension scheme off yet. There is an awful lot of misinformation going around on pensions with the media have caused people to think that pensions are bad when it may not neccessarily be the case.

You can have a personal scheme running along side the employers pension. What type depends on your circumstances. The rules are changing next April so what restrictions apply now, will not apply then. It may not be a pension but an alternative savings product that ends up being more suitable for you.