How important is a company pension?

[butler]

What, you gonna sell her?!

 

Wish I could at times......

[Dr.Green]

This is exactly what i done about 12 years ago and was the best thing i did, also all the rent is tax free.

 

12 years ago price's were alot cheaper thou - -but if a similar opertunity arrives i would do the same.

[Quickthorn]

put your money into a second property to rent, by the time you retire the mortgage is paid and the rents your income.

 

 

I think that ship sailed a long time ago.

 

Company pension schemes are normally a good idea, because you're getting the employer's contribution, plus your contributions are tax free. That's in contrast to a lot of private schemes, some of which have turned out to be poor value. As far as I know, a pension's more tax efficient than just saving off your own bat, even if you've got an ISA.

 

Best thing you can do is get some proper advice from a genuine and independent advisor.

 

edit: re rent from a second property being tax free: it certainly is not. You can offset all the expenses against your income, but you're supposed to pay tax on any profit. The only tax free rent you can get is for renting rooms in youir own home, under rent a room scheme.

Edited February 6, 2012 by Quickthorn

[agg221]

Just wondering what people's thoughts are on a company pension? I'm 29 now and have started with a company who has a pension, they put twice what I put in. Which seems good. Obviously a lot of people would be happy with a job at the minute never mind a pension, but I'm just interested in wether people think it's something I should be worrying about?

 

I would regard this as a good thing.

 

For the majority of employed people (I suspect this is not the status of many people on Arbtalk who appear to be self-employed) a pension is a sensible thing to plan for. Following the collapse of Equitable Life, the remaining companies are heavily regulated so it's pretty secure.

 

The amount you put away each month is realistic and you're effectively more than tripling it when the fact that it's tax free is taken into account. Compare this with, for example, the amount of your net salary you would need to pay the mortgage on a second house as others have suggested.

 

Consider that, in the end, there is likely to be a period before you die where you can no longer work. During this period, you will need more than state benefits if you want to do anything with your remaining years. This isn't about luxury cruise holidays, it's about having enough to heat the house, or to visit the grandchildren. The basic state pension won't do this, having a bit more coming in will make this possible.

 

It can get a little complicated when you move company as you do end up with a series of little pots of money from each if they're using different schemes, but you don't have to do anything with them - just keep them all in a big folder and when you're ready to turn them into an annual income you cash them all in together via a pension provider. Simple.

 

So, unless you really need the small amount of extra monthly income now, I would regard more than tripling your money as a very good deal.

 

Alec

[mikecotterill]

I would regard this as a good thing.

 

For the majority of employed people (I suspect this is not the status of many people on Arbtalk who appear to be self-employed) a pension is a sensible thing to plan for. Following the collapse of Equitable Life, the remaining companies are heavily regulated so it's pretty secure.

 

The amount you put away each month is realistic and you're effectively more than tripling it when the fact that it's tax free is taken into account. Compare this with, for example, the amount of your net salary you would need to pay the mortgage on a second house as others have suggested.

 

Consider that, in the end, there is likely to be a period before you die where you can no longer work. During this period, you will need more than state benefits if you want to do anything with your remaining years. This isn't about luxury cruise holidays, it's about having enough to heat the house, or to visit the grandchildren. The basic state pension won't do this, having a bit more coming in will make this possible.

 

It can get a little complicated when you move company as you do end up with a series of little pots of money from each if they're using different schemes, but you don't have to do anything with them - just keep them all in a big folder and when you're ready to turn them into an annual income you cash them all in together via a pension provider. Simple.

 

So, unless you really need the small amount of extra monthly income now, I would regard more than tripling your money as a very good deal.

 

Alec

 

This was another thing I'd wondered. I thought that for it to be any use I'd have to stay with the company for the next 20yrs or so. But your saying it doesn't matter if I move I'll still get something?

[djbobbins]

I would go with the "recommend" camp on this one, and sooner rather than later for three reasons:

 

(1) The sooner you start making contributions, the more years they have to earn a return.

 

(2) Once you have had a couple of months of paying the money into your pension, you will get used to not having it in your take-home pay so won't notice the difference.

 

(3) Based on my experience, company pension schemes only get less generous as time goes on, but are often left to run under the old conditions for existing contributors.

 

 

If the scheme is anything like the one I am in now and the one I was in with my previous employer, it can be left in deferral should I change company, so come 65 (if I make it that far) I will hopefully have a small pension from one company and a healthier one from another.

 

Re: the comment earlier above about there not being a pension when we get old (i.e. from the state) surely all the better reason to start investing yourself!

[WorcsWuss]

I'm with the Aye's.... If you're being offered one get in it. As has been said, they're heavily regulated now so relatively safe. And now that the days of gold plated final salary schemes are over [which was mostly for the public sector and didn't actually appear that much in the more realistic commercial world] the whole pension system, while making far lower, and more sensible, claims and returns, is a whole lot more sustainable. Whether it can fully recover is another question, but so long as we sign up to pension schemes which have realistic rates of return and treat them more as a saving scheme rather than some alchemy based money multiplier which defies the laws of economics, a basic company pension is a good prospect. If for no other reason than you're basically earning more but not really paying any more tax.

Bite their arm off!

[Steve Bullman]

Re: the comment earlier above about there not being a pension when we get old (i.e. from the state) surely all the better reason to start investing yourself!

 

The government can dip into private pensions also.

[Steve Bullman]

The state pensions are running out even now. I've been contracted out of the state pension since I was 18, and this year they are putting an end to that...why? I assume because they dont have enough money to pay out the pensions they currently have to pay so need more money in the kitty now

[gensetsteve]

I would view most pension schemes with suspicion most seem to pay below building society rates at best and your money is locked for 20-30 years. When you retire You need to be either skint and hopefully pick up social benefits if they still exist ( ie get your tax back ) or be very well off. Being slightly better than skint and saving all your life will probably leave you worse off as people are finding now.