Company pension plans
If you are employed, it is often easier to look at your employers Company Pension Scheme, to see what it has to offer. You would need to get careful advice on what would be the best type of pension for you, but there are many benefits to enrolling in your company pension plan.
Types of Company Pension Plan
Although these vary from company to company there are two general types:
Salary Related Pension Scheme
This is based on the amount of wage you receive and the number of years you have been in the scheme.
Money Purchase Scheme
This is based on how much has been paid into the scheme and how well the money in the scheme has been invested. On retirement the fund is used to buy an annuity which is a regular income for life.
Company Pension Plans can be funded or non-funded. Non-funded simply means that you don’t pay into the scheme, the company pays your pension contributions for you. The company do achieve tax relief on these payments, and they often use these schemes as a way of attracting employees to their company.
Your Rights to a Company Pension
As long as your company has 5 employees, earning above the National Insurance Limit, they have to offer a pension scheme to their employees. This often takes the form of a Stakeholder Pension, but can be their own Company Pension Scheme.
Companies often opt for the Stakeholder Pension as it is more flexible and takes less commitment from them, however, where there is a Company pension plan in place you should check:
1 How much you will have to pay (this is usually a fixed percentage of your salary)
2 What contribution your employer is going to make
You are normally able to make additional payments into your pension fund should you require. This is called Additional Voluntary Contributions (AVCs)
Things to consider about Company Pensions
* The amount you have to pay in - in other schemes, for example a stakeholder pension, you can amend the amount contributed without penalty.
* What are the penalties, if any, if you decide to move your funds to a new scheme.
* How much will you get when you retire?
* Are there survivor benefits and what are they estimated to be?
* What will you get if you retire early due to ill health?