Company pension

My employer is offering me a company pension.  Should I take it?

Usually the answer is yes, as normally a company will also be making contributions to your company pension.  However, as with all long-term, potentially crucial, financial commitments, you should seek pensions advice from an independent financial adviser before committing to any schemes.  You must be sure in the knowledge that your financial plan will meet your future requirements and good financial planning and financial advice will help you to do that.

Depending on your age, income and assets (for example, an existing investment portfolio), a pension may not be the best way of funding your retirement.  You may need some independent investment advice or investment management instead.

How do I know if it’s a good company pension?

Company pension schemes vary with each company.  The scheme you are being offered is likely to be a money purchase scheme (these are generally a cheaper option, but have lower flexibility and fund choice than most personal pensions).

Another type of scheme is a salary related scheme, known as a defined benefit scheme.  Here, the amount of pension benefit you receive is based on your salary and the number of years you have been in the scheme.  These types of scheme are getting rarer and most have now stopped admitting new members due to the deficit that they find themselves with, ie. they don’t have enough money to pay all the pensions that they need to.

With a money purchase scheme, the amount you receive is based on how much has been paid into the scheme and how well the money invested has grown.  When you retire, your fund is used to provide your pension, usually by buying an annuity (a regular income for life). 

What else should I check on my company pension?

You should check with your employer how much you need to pay towards your pension and what contribution they are going to make.  Your payment is usually a percentage of your salary on which you will make tax savings.  However, it may not be the most tax-efficient way for you to save towards your retirement.

Having a company pension does not affect your Additional State Pension entitlements, but you will lose some or all of your additional State Pension if your company pension scheme is contracted out of the Second State Pension.

If you are considering a new pension scheme, are in the millionaire asset group or a small business owner, your retirement plans are very important.  Please give us a call to find out more about the options available to you.  As pensions are usually used because of the tax advantages we will also give you the relevant tax advice.

I have left the company and want to know what to do with my company scheme.

Please see our page on Personal Pension Transfers for more information.

Any questions about your company pension?

Please call us on 01582 839280 or Email us.