Possibly basic advice regarding works pension scheme
Discussion
Sorry but the search feature doesn't seem to be working. I am completely clueless when it comes to pensions.
One of the things which I intend to do in order to ease my financial situation is to get out of my employers pension scheme. I've only been involved for 18 months but the payments are too high for my current situation.
I have enquired about the rules and I can get out if I give a months notice, but they will not refund my contributions. I will have three months to find another scheme which suits me better, or else my contributions will simply be lost. Seems a little unfair since it says in the literature that I can withdraw and get a refund in the first 2 years, but apparently that no longer applies...
In an ideal world I wanted to cancel my membership, saving a fair amount each month, and use the money already paid in to clear a credit card debt which would ease my situation further.
So I wonder whether I could transfer to a scheme which allows me a way out? Preferably by releasing at least some or all of the money I've paid in so far.
Any advice would be welcome.
One of the things which I intend to do in order to ease my financial situation is to get out of my employers pension scheme. I've only been involved for 18 months but the payments are too high for my current situation.
I have enquired about the rules and I can get out if I give a months notice, but they will not refund my contributions. I will have three months to find another scheme which suits me better, or else my contributions will simply be lost. Seems a little unfair since it says in the literature that I can withdraw and get a refund in the first 2 years, but apparently that no longer applies...
In an ideal world I wanted to cancel my membership, saving a fair amount each month, and use the money already paid in to clear a credit card debt which would ease my situation further.
So I wonder whether I could transfer to a scheme which allows me a way out? Preferably by releasing at least some or all of the money I've paid in so far.
Any advice would be welcome.
You have got the wrong end of the stick here. When they say you lose contributions they mean you will lose what the company has paid in in addition to your contributions.
Normally you have to be in for two years and then if you leave the comp before or your cancelling situation you would get your contributions back. However this last year or so I've seen among a number of companies where that isn't the case nothing can be withdrawn it's locked in until it's possible to draw it at pension age.
So if you cannot withdraw it then you can cancel it. Pay more cash into paying off your cr card debt then once cleared start paying into a new pension. It's a must do investing in your retirement
Normally you have to be in for two years and then if you leave the comp before or your cancelling situation you would get your contributions back. However this last year or so I've seen among a number of companies where that isn't the case nothing can be withdrawn it's locked in until it's possible to draw it at pension age.
So if you cannot withdraw it then you can cancel it. Pay more cash into paying off your cr card debt then once cleared start paying into a new pension. It's a must do investing in your retirement
If you have less than 2 years membership then the law allows you to take a refund of your own contributions, although then they'll keep back the employer contributions and you'll lose these. The option to take a full transfer value within 3 months is an additional option.
This assumes that your scheme is an occupational scheme, so not a personal pension or stakeholder plan. Also. assumes that you have not been paying "your" contributions via the salary sacrifice route (if you have then legally these count as employer contributions so cannot be refunded)
This assumes that your scheme is an occupational scheme, so not a personal pension or stakeholder plan. Also. assumes that you have not been paying "your" contributions via the salary sacrifice route (if you have then legally these count as employer contributions so cannot be refunded)
Ok thanks for the help guys.
Since my contributions are paid via "salary sacrifice" does this mean then that I have no right to the funds which would otherwise have been mine??
This is the response from our pensions person:
"You can decide to withdraw from the scheme giving 1 month's full notice.
However, you must be aware that your life cover reduces from x 4 pensionable
salary to x 1 pensionble salary.
Unfortunately you won't be able to have a refund of contributions (that was
possible under the old Final Salary arrangement). The rules under salary
sacrifice for the existing DC scheme means that you will have a 3 month
window to find a personal pension arrangement and transfer your benefits
across. If you wish to do this I suggest you find a suitable compatible
scheme, get yourself enrolled as a member then give notice to our scheme and
transfer your benefits across. If you don't do this you will effective
'lose' your benefits."
Since my contributions are paid via "salary sacrifice" does this mean then that I have no right to the funds which would otherwise have been mine??
This is the response from our pensions person:
"You can decide to withdraw from the scheme giving 1 month's full notice.
However, you must be aware that your life cover reduces from x 4 pensionable
salary to x 1 pensionble salary.
Unfortunately you won't be able to have a refund of contributions (that was
possible under the old Final Salary arrangement). The rules under salary
sacrifice for the existing DC scheme means that you will have a 3 month
window to find a personal pension arrangement and transfer your benefits
across. If you wish to do this I suggest you find a suitable compatible
scheme, get yourself enrolled as a member then give notice to our scheme and
transfer your benefits across. If you don't do this you will effective
'lose' your benefits."
Edited by matt0677 on Thursday 22 July 22:44
I did find that Martin Lewis Pension advice & Pension experts advice very good (although knew most of it already).
The thing which shoked me was the bag of fag packet numbers if in defined contribution say you start at x age then you need to contribute x/2 as a % of your salary from that day forward until retirement.
I started pension @18y.o. but only had my first proper post Uni Job at 22 at which point I went into a 1/60th 3% contribution final salary pension I had 7 years of that - during the time the company were physically paying in 18% which went up to 32% due to scheme defecit... but makes zero difference to me.
After that I had 2 defined contribution pensions one where it was 6% contribution matched by the employer and the other 4% which was matchedx2 by the employer.
I then switched into a private pension for a period of time putting in IIRC 7%.
Currently am in a Final Salary pension 7% contribution yeilding a 1/60th accrual rate.
I actually worked out what my pension would be today if I stopped working based upon my earnt final salary's and my defined contribution pots. Now note I earn a very good salary, vs the average salary for my working sector Im well over double/three times (which is nice by hook or by crook).
However even with that & excluding the State pension I currently at low 30's have what I'd only consider to be a fair retirement pot. If I carry on for another 10 years work at this level & no salary increases I'd be very comfortable excluding state pension.
Luckily my wife has a final salary too and went in from day 1, 8 years in the job now and thats a nice compliment to have banked.
Im not putting all eggs in one basket as Im striving to be mortgage free in forever home by 35. Bring on that challenge.
The thing which shoked me was the bag of fag packet numbers if in defined contribution say you start at x age then you need to contribute x/2 as a % of your salary from that day forward until retirement.
I started pension @18y.o. but only had my first proper post Uni Job at 22 at which point I went into a 1/60th 3% contribution final salary pension I had 7 years of that - during the time the company were physically paying in 18% which went up to 32% due to scheme defecit... but makes zero difference to me.
After that I had 2 defined contribution pensions one where it was 6% contribution matched by the employer and the other 4% which was matchedx2 by the employer.
I then switched into a private pension for a period of time putting in IIRC 7%.
Currently am in a Final Salary pension 7% contribution yeilding a 1/60th accrual rate.
I actually worked out what my pension would be today if I stopped working based upon my earnt final salary's and my defined contribution pots. Now note I earn a very good salary, vs the average salary for my working sector Im well over double/three times (which is nice by hook or by crook).
However even with that & excluding the State pension I currently at low 30's have what I'd only consider to be a fair retirement pot. If I carry on for another 10 years work at this level & no salary increases I'd be very comfortable excluding state pension.
Luckily my wife has a final salary too and went in from day 1, 8 years in the job now and thats a nice compliment to have banked.
Im not putting all eggs in one basket as Im striving to be mortgage free in forever home by 35. Bring on that challenge.
Not saving for your pension to save expenses now is a very very poor decision on anyones part. You'll end up trying to live on a state pension, and that's going to get less and less. And you might have a lot of retirement years of that misery.
The whole big mess started when the state pension was introduced with an age of 65, at a time when average life expectancy was 63. So about half the pop never got anything.
Now life expectancy at age 65 is 20 years. Who exactly is going to pay for all those years of pension if nobody pays in? No government really realised how big the sums were going to be, but in 20 years time we're looking at only two people working for every one retired, so things have got to change big time. One thing is for sure, if you hope someone else is gonna pay for you to do nothing then think again.
The whole big mess started when the state pension was introduced with an age of 65, at a time when average life expectancy was 63. So about half the pop never got anything.
Now life expectancy at age 65 is 20 years. Who exactly is going to pay for all those years of pension if nobody pays in? No government really realised how big the sums were going to be, but in 20 years time we're looking at only two people working for every one retired, so things have got to change big time. One thing is for sure, if you hope someone else is gonna pay for you to do nothing then think again.
Totally agree with the above living beyond your means now resulting in not being able to afford pension contribution.
Remember when you have kids only one salary coming in kids costs house costs and you still have to save for pension at a higher rate than you had done previously when it was a struggle.
Remember when you have kids only one salary coming in kids costs house costs and you still have to save for pension at a higher rate than you had done previously when it was a struggle.
Just think about basic household costs - exct rent & mortgage:-
All PCM
Building & Contents Ins £40
TV Lic £12
Gas & Electric £75
SKY £60 (incl BBand & SKY land line rental fee)
Water £25
Council Tax £200
Total £412
Mobile x2 £60
Food for 2 nothing special £60pw = £240pcm
Total £712
Now state pension is c£85 each per week so that would pay £680pcm so a defecit + normally women do not get full state pension due to having kids and not paying enough NI years to earn it.
SO if you want a car holidays ability to buy gifts ability to maintain your property ability to buy replacement stuff tv car bathroom kitchen etc - clothing.. meals out then you need to either cut those basic costs above... not easy OR you get a pension in addition to state pension.
THe sooner you start the less % you hae to put in and as Martin Lewis hinted at if you have not yet started to pay into a pension then to calculate what you need to pay in you simply take your current age and halve it thats the % of your gross salary you need to pay in.
Final Salary pensions allow you up to a maximum of 2/3rds i.e. say its a 1/60th accrual rate per years service you can work for 40 years then you should stop thats the most you'll get out.
Im currently up to 9ish years so only 30/31 years service to go in a final salary job and I'll be on 2/3rds my final salary.
Wife is currently on 8 years banked of her final salary so going well.
Final salary pensions also come with life assurance and mine comes with 4 or 5 years gross salary payout if there is death in service and it would also instantly pay out my pension at a reduced rate to my wife.
The other thing by taking the final salary or the defined contribution (which the employer pays into as well) your instantly getting a payrise so to not opt for it you really need that money to be earning more than what they pay in risk free.... highly difficult.
Cut other costs but not your pension.
Ive heard many say I may not live until retirement - true but your wife & kids benefit rather than force them to struggle by and potentially have to sll the family home.
In addition if that is the case why not take out massive mortgages/loans on interest only as you'll probably die before its repayable. Also if that is the thought/view then why bother to work why bother to get educated in college & Uni just live "play"
All PCM
Building & Contents Ins £40
TV Lic £12
Gas & Electric £75
SKY £60 (incl BBand & SKY land line rental fee)
Water £25
Council Tax £200
Total £412
Mobile x2 £60
Food for 2 nothing special £60pw = £240pcm
Total £712
Now state pension is c£85 each per week so that would pay £680pcm so a defecit + normally women do not get full state pension due to having kids and not paying enough NI years to earn it.
SO if you want a car holidays ability to buy gifts ability to maintain your property ability to buy replacement stuff tv car bathroom kitchen etc - clothing.. meals out then you need to either cut those basic costs above... not easy OR you get a pension in addition to state pension.
THe sooner you start the less % you hae to put in and as Martin Lewis hinted at if you have not yet started to pay into a pension then to calculate what you need to pay in you simply take your current age and halve it thats the % of your gross salary you need to pay in.
Final Salary pensions allow you up to a maximum of 2/3rds i.e. say its a 1/60th accrual rate per years service you can work for 40 years then you should stop thats the most you'll get out.
Im currently up to 9ish years so only 30/31 years service to go in a final salary job and I'll be on 2/3rds my final salary.
Wife is currently on 8 years banked of her final salary so going well.
Final salary pensions also come with life assurance and mine comes with 4 or 5 years gross salary payout if there is death in service and it would also instantly pay out my pension at a reduced rate to my wife.
The other thing by taking the final salary or the defined contribution (which the employer pays into as well) your instantly getting a payrise so to not opt for it you really need that money to be earning more than what they pay in risk free.... highly difficult.
Cut other costs but not your pension.
Ive heard many say I may not live until retirement - true but your wife & kids benefit rather than force them to struggle by and potentially have to sll the family home.
In addition if that is the case why not take out massive mortgages/loans on interest only as you'll probably die before its repayable. Also if that is the thought/view then why bother to work why bother to get educated in college & Uni just live "play"
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