Company Pensions - The Facts!

April 18, 2006 at 7:48 pm · Filed under Preparing for Retirement, Company Pensions

In broad terms a company pension can be explained as a pension which is established by a company to accommodate the pension needs of its employees. There are two types of company pension. There is a contributory company pension, in which the pension contribution is automatically taken out of the employee’s salary, before tax and to which the employer can choose to match this contribution with their own. There is also the non-contributory company pension, in which the company contributes the payment towards the pension on the employee’s behalf.

Final Salary Explained

The final salary company pension scheme offers the employees a proportion of their salary at the time of retirement. This figure is normally calculated as one sixtieth of the employee’s salary multiplied by the number of years they have been employed within the organisation. This company pension has frequently
appeared in the press recently as many larger UK firms have closed this company pension to new employees and in some cases have frozen the pension of existing employees. This has occurred
as the risk of this type of pension lies with the employer and not the employee.

Money Purchase Explained

With the money purchase company pension, the actual pay-out sum on retirement is directly attributable to the amount of money the employee has paid in, how well the investments perform and the annuity rate. Unlike the final salary company pension, the risk lies with the employee.

Final Salary v. Money Purchase.

Although the headlines keep drawing our attention to the fact that many companies are moving away from the final salary company pension towards the money purchase, it would be dangerous to automatically presume that you are better off with a final salary scheme rather than a money purchase. In fact, even though it is generally accepted that the move away from final salary schemes is not in the best interest of the employee’s future, there are individuals who may be better off under a different scheme anyway. It will depend on an individual’s circumstances. For example, a person who changes their employer every year may be much better off with a money purchase scheme as it could provide them with greater flexibility. It is always best to discuss your personal situation with an experienced and unbiased financial adviser in order to decide which company pension is the most suited to your circumstances.

About the author:
Elizabeth Grant writes exclusively for the/” target=”_blank”>http://www.the-mortgage-broker.ltd.uk”>The Mortgage
Broker specialist websites. To read more of Elizabeth’s articles on Adverse Credit Mortgages please visit the pension/” target=”_blank”>http://www.pension-transfers.com”>Pension Transfers website.

Comments

Frozen Company Pension - The Options!

April 18, 2006 at 7:44 pm · Filed under Preparing for Retirement, Company Pensions

You can hardly have failed to notice that the prediction for UK pensions is not good. Like many European countries, the UK has an aging population and a decreasing birth rate. Whilst the workers are currently funding the old aged pensioners, it remains unclear how the next generation of old aged pensioners will be funded. Simply put, we are getting older and the pension scheme currently in place is not able to accommodate this. As society’s attitude towards work has also undergone a major transformation whereby a job for life no longer seems to be the norm, the number of employees with a frozen company pension scheme is also on the increase. In fact, many people are changing their job so often that they have accumulated a number of frozen company pensions. So, what are the options available for those with a frozen company pension? Pension plans can become frozen if you have been part of a company pension plan and you then decide to leave the company. Normally this happens
when you have been working for the company for two years. This pension plan is known as a frozen company pension as you are unable to then pay any contributions into it. If you have a frozen company pension you will not be able to simply draw money out of it as the money will have be paid before tax. This means that the Inland Revenue have strict regulations as to how to deal with a frozen company pension. Although this may seem as though it is fairly final you will still have a few options available to you. These frozen company pensions options can be summarised as follows:*Transferral - Transfer the frozen company pension to another company pension scheme. Allowing you to then make new contributions

*Acceptance - Leave the frozen company pension with your previous employer and accept that you will not be able to pay into it again

*Conversion - Convert the frozen company pension over to a Personal Pension Plan, allowing you to start making contributions again *Buy Out - Transfer the frozen company pension to a Section 32 Buy Out Policy

It is always advisable to discuss these four options in more detail with a financial adviser to ensure that you are fully-informed about your future possibilities for your frozen company pension. By having a full understanding of the implications of freezing plans and investment approaches when evaluating the requirements of a frozen company pension plan, you can rest assured that you will be making the best decision for your retirement.About the author:
Elizabeth Grant writes exclusively for the/” target=”_blank”>http://www.the-mortgage-broker.ltd.uk”>The Mortgage Broker specialist websites. To read more of Elizabeth’s
articles on Adverse Credit Mortgages please visit the href="pension/” target=”_blank”>http://www.pension-transfers.com”>Pension Transfers
website.

Comments

Is It A Good Time For Your Pension Transfer?

April 18, 2006 at 7:38 pm · Filed under Preparing for Retirement, Company Pensions

Opting for a pension transfer is something you can do at any stage of your working career.

Like many investment decisions, though, the timing of a pension transfer is crucial, and it’s for this reason that you shouldn’t transfer your pension without consulting a pensions expert. There are several factors to take into consideration when you are thinking about transferring your pension:

Why do you want a pension transfer?

For most people, thoughts of pension transfer occur when they are moving jobs. The majority of companies offer pension schemes as part of their benefits package, and although you are unlikely to see the details of the new scheme before you join, the fact that a good pension scheme acts as an incentive to prospective employees. If you start work at a new company and join the pension scheme, what happens to your old pension?

In many cases, you can transfer your pension in order to take advantage of better annual management rates, or better benefits than your current scheme offers. This means that the money you have invested will be working harder for you when it comes to retirement. Alternatively, you may want to transfer your
contributions to a scheme where you can continue to contribute throughout the rest of your working life, ensuring a continuity of benefits and a more valuable pension pot when you reach retirement.

When should you transfer your pension?

Every pension transfer in the UK falls under FSA regulation, and you should only transfer your pension after you have taken independent specialist advice. The pensions market is notoriously complex and, in order to ensure that you are getting the best deal, you need to speak to a pension transfer advisor
who knows the market well and can give you the advice you need. 

Don’t rush into transferring your pension. If you get it wrong, you could end up with an inferior pension scheme to the one you came out of, and you could end up paying higher charges to transfer, or a higher annual charge than you need to. Make sure you have done some research on the types of pension that may suit you best, and that you consider all the pros and cons of transfer before you commit yourself.

About the author:
Elizabeth Grant writes exclusively for the/” target=”_blank”>http://www.the-mortgage-broker.ltd.uk”>The Mortgage
Broker specialist websites. To read more of Elizabeth’s articles on Adverse Credit Mortgages please visit the pension/” target=”_blank”>http://www.pension-transfers.com”>Pension Transfers website.

Comments

« Previous entries ·