Pension Choice

[denislawsbackheel]

What happens to all your contributions if they (pension provider) go bust? Are they protected?

If you are still working 90% is protected.
If retired and drawing it 100% is protected.

 

[RobMCFC]

I’ve had several people over the years telling me to put as much as I can in my pension. However, I always feel that a balance between spending now and sticking money in a pension fund is the best way forward.

I put 3% in and my employer 5.5%. My employer puts this in regardless of what I put in. In fact I put in nothing for many years.

The simple fact is that you‘ll never need as much as when you are paying for your 2 kids growing up.

I could put a bit more in but then I’d have to give up some of our holidays and short breaks ....... and seeing what can happen to people, I’d rather have the memories!

 

[trumpton]

Yes my work scheme is good, think it's nearly double what i put in

was thinking of stopping it for one year to pay off a loan, then rejoining

didn't actually know this was optional

You can opt in and out when you choose.

Personally, I've opted out full stop. Would rather clear my debts down sooner rather than later and make my own provisions. As my dad said, better an interest receiver than an interest payer. No point putting into a retirement pot whilst paying say 20% Apr on a credit card at the same time.

Company auto enrolled me into the Nest pension scheme. I stuck with it for a couple of years before I looked at my retirement projections. Carry on paying up to my retirement, to get my money back I'd have to live to the ripe old to age of 90!

 

[mancityvstoke]

Zen
I always found it a complicated subject and some of my understanding may be off as I retired a few years back.
Maybe and hopefully helpful is the following
The state pension is covered as long as long as enough folk continue to work and fund the lavish lifestyle of us oldies via NI contributions. The lower the overall sum of NI contributions the bigger the pressure on the gvmt finances. It’s why changes have been enforced on statutory retirement ages. Even putting payment commitments off by a year can have a big impact and help gvmts. Conversely the triple lock hammers the gvmt finances which is why the gvmt would love to do away with it. Ideal for the Tories would be a lot more pensioners dying, higher retirement ages to defer state pension payments and people working and paying NI for longer.
With regards public sector final salary type pensions many are 'unfunded' schemes in that there is no central fund, and they are paid for only by taxpayers year by year. Pensions of teachers, firefighters, NHS workers, the police and the armed forces are the best examples.
Of course MPs belong to a gold plated arrangement and
can choose to contribute at 1/40th, 1/50th or 1/60th In a final salary arrangement. It is a contributory pension with the contribution rates set at 11.9%, 7.9% and 5.9% of salary respectively. I think I understand that it’s about the best pension scheme still going. And why not coz they all work so hard for us commoners?
With regards most workers arrangements.
If you are in a defined contribution scheme like most folk your pension pot is safe and belongs to you and is invested in stocks and shares etc by whoever administers it. Of course, as the sales blurb goes the value of your pot can go up or down
If you are in (very luckily) a final salary scheme or have invested into a scheme that is now frozen or you’ve left it behind when working in a previous job it’s quite likely that a decent slug of the overall pot in the fund is invested in Gilts.
The last figure I saw was that overall in the UK Gilts account for some 20% of assets in these funds.
As the unit value of a gilt declines the organisation has to find a way to fill the shortfall to keep the fund topped up to assure that the liabilities can be met - where there’s a shortfall this is often done via a repayment plan.
This is what the reported worry is about. Where will companies find additional funds to top funds up as the value of Gilts falls….when often Boards of directors want to put shareholders dividends ahead of these payments or where the company is basically on its arse and has no spare cash or it wants to invest in technology or infrastructure or whatever to secure its future?
If any of these final company pension funds fail the default is the Pension Protection Fund. This security fund underpins the final salary schemes and takes on the liability and pays out a high percentage of peoples due pensions- some 90% I think.
Hope this helps

Thought this deserved repeating........... thanks to @BeerIsTheBest

 

[GornikDaze]

You can opt in and out when you choose.

Personally, I've opted out full stop. Would rather clear my debts down sooner rather than later and make my own provisions. As my dad said, better an interest receiver than an interest payer. No point putting into a retirement pot whilst paying say 20% Apr on a credit card at the same time.

Company auto enrolled me into the Nest pension scheme. I stuck with it for a couple of years before I looked at my retirement projections. Carry on paying up to my retirement, to get my money back I'd have to live to the ripe old to age of 90!

I think you may have misread that… the regulator insists on annuity income figures being shown at retirement. The reality is that no one buys an annuity these days. You can in theory take all of your pension pot in one lump at retirement - you’d pay a lot of tax though! Even a small pot is a good supplement to state pension even if it runs out in later life

 

[mancityvstoke]

If your pension pot is £400,000

Can you really take £100,000 tax free?

 

[GornikDaze]

If your pension pot is £400,000

Can you really take £100,000 tax free?

Yes 25% is generally the max tax free

 

[denislawsbackheel]

Thought this deserved repeating........... thanks to @BeerIsTheBest

It is outdated though.
Most public sector pensions, if not all, are no longer final salary schemes but career average and it fails to mention that all public sector employees contribute to their pension. Teachers for instance pay between 7.4 and 11.3% of their salary depending on how far up the pay scale they are.

 

[Kompany Car]

If your pension pot is £400,000

Can you really take £100,000 tax free?

Absolutely, if you have the maximum allowable in before you get hit with the 55% super tax which is around £1.07m, assuming that you earn enough to do so, you could have £250k tax free.

It’s sounds a lot but it’s certainly possible if you a £100k plus salary and have invested it well.

I know some senior directors in private firms who are still in the British Rail pension scheme (via TUPE arrangements). They are taking early retirement so they don’t exceed the limit, remembering that final salaries pensions are assessed as 20 times their yearly value.

 

[Tommy_Catons_Perm]

You can opt in and out when you choose.

Personally, I've opted out full stop. Would rather clear my debts down sooner rather than later and make my own provisions. As my dad said, better an interest receiver than an interest payer. No point putting into a retirement pot whilst paying say 20% Apr on a credit card at the same time.

Company auto enrolled me into the Nest pension scheme. I stuck with it for a couple of years before I looked at my retirement projections. Carry on paying up to my retirement, to get my money back I'd have to live to the ripe old to age of 90!

That doesn't make sense. Say typically you pay in 4% and the employer matches it at 4%. You also get tax relief so your 4% becomes 5%. So you actually paid in only 4% of your own money for a return of 9%. You have more than doubled your money. In fact 9/4 = 2.25.....A whopping 225% return. It's very short sighted to miss out on this free money.

And you might live to be 90.