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Seeking Pension Advice

Hello.

I am seeking advice on pensions. I am just wondering what the best options are and how pensions work?

I am currently employed full time and have been with the same company for 4 years. As I understand it, if I sign up for a company pension, the company puts in a similar amount each payday when it is taken out the salary.

A lot of people have said it is usually best to sign up for a pension with the company you work for? Is this the case?

And what happens if you switch companies? If by the time I retire I have worked for several different companies, I may end up having small pensions with each of them for the amount of time I was there?

What about outside companies dealing with pensions, would it be easier to go with just one outside company if you think you might be switching companies a few times during your working life?

A couple of years ago I received something through the post from local government about my state pension. They said that I may need to pay them extra money as I had been unemployed for a short time when I was a late teenager, and in my early 20's. There were one or two occasions when I was out of work for up to 6 months. Also I spent 3 years in college and 1 year at University so that has also taken a bit of time away from earning a full time salary.

My current salary isn't too great. And I am in a lot of debt from University still, and have credit cards I need to clear down. I am in the process of juggling my finances and have banned myself from using a credit card, except in online shopping situations where I can not use a Switch Card. And even then I am being really strict with myself, and have to pay the money to my card before using it.

This way my balance is always going to fall. I am also every so often paying more than the minimum amount. I have switched my balances to cards with lower APRs, and I hope to reduce my credit card bills a lot because I believe the rates will go up over the next few years, and I also believe the economy may go downhill as well.

I believe I have a good capacity and opportunity to drastically increase my income in the future though, but that may be with a different company to the one I am presently with. I also have ideas about trading online, and am exploring different things.

At present I may just about be able to afford a pension. I have recently started saving a regular amount of money from my salary into a savings account, which I intend to invest long term in stocks and shares etc. I may be able to afford the money needed to be taken from my salary for a pension each payday as well, but needed to know a little more first.

As far as pensions go, I am still not too sure on what the rules are with private pensions i.e. with the company you work for? For example, if I wanted to retire to Australia, I know that with the state pension, once you retire and emigrate, the pension is fixed permanently at the rate when you move abroad. It is not index-linked and will not increase with inflation, whereas if you remained in the UK or Europe it would increase. I have always thought this was a very bad decision by our government, and a totally unfair one. If we have worked hard all our lives we should be able to retire wherever we want and not be discriminated against because of this, and be worse off financially.

Would a private pension with the company you work for, or, elsewhere be index-linked if you wanted to retire to somewhere like Australia?

And if you do go for a private pension with your company, do you still receive any state pension, or a refund from the government? If money is coming out of your taxes to pay for a state pension, surely everyone should still receive one as well? Or at least receive some sort of money back if you sign up for a private one? We would be paying twice for the same thing otherwise would we not? I believe this may be a bit like the NHS. People who decide to get a private plan, still have the money taken out their taxes for the public (NHS) one. So people on lower salaries who would like to have a private health care plan, can't really afford one, and have to make do with the NHS.

I believe that I definitely want to get a private pension, because I know that by the time I retire the state pension will be peanuts due to the fact that Gordon Brown raided the pension funds recently and took £5 Billion for more public spending. So in future earnings potential, that £5 Billion could relate to a loss of £30 Billion from the state Pensions, which will effect people like myself around the years 2040 to 2050, the time when I will be due to retire.

Anyway, thanks very much for any help with the questions I ask on pensions.

John

Reply to
John
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you really need to ask the company about its scheme to see how much (if any) they put in and what type of scheme it is - "defined contribution" or "defined benefit".

this is traditional wisdom from the days where people held one job for a long period and companies provided "defined benefit" pensions where you might retire on 2/3 of your final salary.

For portability a "personal pension" is yours to control and your employer may make contributions to these esp under the "stakeholder" regime.

Many pensions are long term savings schemes for retirement, you should concentrate short term on getting rid of expensive debt like credit cards. No point in saving in a pension at a few % per year while paying many % per year interest on a CC debt.

*If* the company makes contributions is may be worth taking up a pension, but consider the contributions that you will have to make vs paying off your debts.

Phil

Reply to
Phil Thompson

What you really mean is that you wish to save for your income in retirement. Using a pension plan is only one way to do this. If your employer will match your own contributions, then it is foolish to ignore this, as you are taking a pay cut for no gain.

The pension funds which Brown raided are those providing final salary pensions and money purchase pensions. He has also skewed the S2P scheme in favour of lower earners. Indications are that his intention is eventually to make it a flat rate scheme, or nearly so. However, don't ignore your S2P entitlement, as it can be a valuable addition to your eventual pension. Just don't rely on state promises for anything.

Also don't forget that State Sector pensions are worth their weight in gold. The rest of us tax payers pay for them year by year.

Reply to
Terry Harper

Thanks for the advice guys.

John

Reply to
John

Sorry, don't have time to work through your post.

It's a FAQ so search the archive

Work through The Motley Fool 10 Steps -

Send off for a state pensions forecast (form BR19) and make up any class 3 NI payments you can (although clearing the debt may be a higher short term priority)

Use the statement of affairs, the Snowball system and The Motley Fool Dealing with Debt forum to clear your debts -

Pensions are just a means of saving. The tax differences between them and ISAs are minor. Given the risk of future changes the wise thing seems to be to use both ISAs and pension funds. Join your employers fund as it's basically free money if they contribute.

Be aware that under the current rules the government will give you a minimum income even if you save nothing for a pension. This discriminates against those that do save. It's only worth saving if you expect to get significantly more than the MIG.

Daytona

Reply to
Daytona

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