Pros of your pension
Getting a handle on your salary contributions can set you up for the future
Financial worries or just looking for better value for money? Consumer champion Fergus Muirhead answers your questions
Q I AM emailing you because I read your column about pension funds. I have recently started my first graduate job, so the pension funds are a new thing to me.
The company I have started working with are a limited company and the pension scheme they are in partner with is www.thepeoplespension.co.uk.
I’m thinking ahead about things such as what if the organisation go out of business in future? Are they reliable? Like I said, I’m very new to this so some insight to a newbie would be
appreciated. Marnie Bowes A YOU have no idea how refreshing it is to receive an email like this. Most of the emails I receive about pensions are from people just approaching retirement age, many of whom are worried that they have left it too late to make adequate provision for an income in retirement. So it’s great to hear from someone right at the start of their working life taking an interest in the income they are going to have when they stop work, even though that might be 30 or 40 years down the line. You are working with a limited company and under the autoenrolment legislation introduced a few years ago, they have set up a pension for you. There are a number of things that you need to consider now that you are a member.
The list below is not exhaustive, and I will probably come back to your question in a few weeks to finish off my answer.
Before I address the issues that you need to consider, however, I’m going to say a few words about the question you ask at the end of your email, about what happens if the company you are working for go out of business.
It is an issue that concerns many of us and although it could have severe ramifications for your income in the short term, the good news is that it won’t affect the amount of money you have built up in your pension.
The pension that you have with The
Peoples Pension is a personal pension in your name. You and your employers both pay into it but it is your pension, and any money that is in it will be yours to do with as you please as soon as you get to pension age.
So if you leave your current employers and start to work elsewhere, you can take your pension with you and continue it at your new company or, if your new employers already have a pension scheme then you can pay into the new one and transfer the benefits from your existing employers into your new scheme.
You don’t have to transfer benefits, it might be better to leave the old pension where it is and start a new one with your new employer. You may want to take advice when you move, and it could be that your employer will have an adviser who can give you advice on the best thing to do with your pension.
Depending on the type of work you do, it’s possible that you could end up with three or four pensions, each of which has a small amount of money in it.
So you do need to keep an eye on them and make sure that you notify each company any time you change your address so that they can continue to update you with statements.
Your employer will currently be paying at least one per cent of your salary into your pension, as will you, although it is possible that each of you will pay more than that minimum figure.
Some employers will have a sliding scale of contributions from one to to five per cent and will match whatever you pay. so if you stick to the minimum of one per cent they will pay the same but if you increase your contributions to five per cent then they will do the same, effectively giving you a five per cent salary increase.
Auto-enrolment wasn’t designed to provide all of the income you are likely to need on retirement, rather it will give you a base that you need to build on yourself.
The Government have introduced higher levels of contributions for employers and employees and they will be coming into force over the next few years. I’ll cover these figures in more detail in a couple of weeks, as well as taking a look at the amount of money that you really need to invest in a pension in order to give you an income that you can live on when you retire.
Email your problems to Or post them to The Money Doctor, Daily Record, One Central Quay, Glasgow, G3 8DA Unfortunately Fergus can’t reply to every question in person.