New Pension during BR

[wen]

In my new job I am automatically entered into a company pension scheme unless I write to withdraw from it. (It's the Rail workers one).

Will any contributions I want to make while i'm BR have to come from my surplus BR amount? and how would this all work considering it is deducted BEFORE tax.

Finally, are there any advisors on here that know about pensions or could recommend someone as i'm not sure long time whether it's a good idea not - especially as i'm only 24, and hearing some bad stories about Pensions!

Mr. Wen.

[MelanieGiles]

If the pension contributions come out of your salary automatically then this is unlikely to affect your IPA or IPA payments.

Martin Law of LighthouseTemple - who is an IFA specialising in pensions - occasionally posts on the forum and may be able to help with your queries.

[Skippy]

My pension is deducted at source and the OR didn't even mention it - Dave said it's because at my age they appreciate I need to pay into a pension!

[wen]

LOL @ Skippy... I assume Dave was being rude [:D].

It will be deducted at source before Income Tax and then the remaining pennies from my salary will be paid into the bank.

My point is that if I opt out of the pension, the OR (may) have enough for an IPA, but if I stay in the scheme then the OR probably would not have enough to claim an IPA... so could the OR demand that I opt out of the scheme for the creditors benefit?

[Skippy]

I hope so - I'm only 33!

I don't know if the OR can ask you to opt out so you'll get an IPA as I got one anyway! I suppose they could have made me pull out of the pension and paid more though!

[wen]

LOL ironically I had a phonecall with HSBC talking about my debt problems, and at the end they asked me if i'd be interested in taking out a pension as although i'm 24, "i'm never too young to start"....... Thought there was a level of ironic sales driving there - I couldn't pay my loan repayments so where was the money coming from for a pension!! [:D]

[wen]

Melanie, re: Martin Law... under which name does he post on here?

[MelanieGiles]

IFALaw I think!

[IFA Law]

Hi,

Do you know if it is the final salary scheme or money purchase scheme they are offering?

The Railway pension can be either a final salary scheme or a money purchase scheme. It is up to the discretion of the individual company you work for. If you have access to a final salary scheme then you should very seriously consider joining it. This type of scheme are becoming rarer as time goes on because they are expensive to run. They are the Rolls Royce of pension plans.

For each years service you will receive a percentage of your final salary at retirement. Ie if the plan has an accrual rate of 1/80, and you have 20 years service. Your pensionable income at retirement is £20,000 you would receive:

20 x (1/80) x £20,000 which provides an income of £5,000. You would be able to take a lower pension and access up to 25% of the fund as tax free cash.

If you have a money purchase scheme available, it would still be worth considering joining the scheme as they are paying into your own fund which you may be able to take with you when you change jobs. There are more decisions to make with this scheme as the end value depends on the investment performance of the funds and other factors at retirement. You also have to choose which fund or funds you want to invest in. How many do you choose and what geographical spread do you have?

As regards to someone’s age for joining a scheme. The younger you are, the better. If you delay paying into a pension plan, you are potentially reducing your income at retirement. Waiting until you are older means for the same level of benefits, you pay more.

[wen]

Hi Martin, thanks for the information.

The rail operator have this on their website:

"Final salary contributory pension scheme".

It sounds as this would be a benefit, however if I was to leave the company and move to a different company (outside of Railway), what would happen to this Final Salary Pension?

[IFA Law]

If you are in the scheme for more than two years the scheme will make the benefits 'paid up'. Basically this means that you will have a benefit statement showing the pension you will get at retirement based on the years of service at the date of leaving their employ. Even if this happens, the benefits can often be greater than those in a personal pension plan.

If you have under two years service, you will be refunded your premiums less tax.

[wen]

Can the final salary pension not be transferred to another employer with their own FSP?

[IFA Law]

It is possible to transfer the pension, but it up to the discretion of the trustees of the recieving scheme and if the scheme allows it. You also have to compare your existing scheme to the one you want to transfer to. It may be that the new scheme doesn't provide as good benefits or is more expensive.