Company Pension Schemes Explained

Company Pension Schemes Explained

If you work for a company that offers a pension scheme, it can often be wise to join it.

A good company pension scheme is one of the best benefits a company can offer. By their nature, they often offer better benefits than personal pension plans, and because the employer also pays a contribution in the plan, your fund may be larger than if you are paying into a plan individually. As your income increases during your time with the company, so do your and your employer's contributions.

Company pension schemes are based on your income and on the length of time you work for the company. As your income increases during your time with the company, so do your and your employer's contributions, and your pension is based on the final salary you are earning either at retirement or when you leave the company. This means that if you join a company on a starting salary of £20,000 and retire on a salary of £50,000, your pension will be based on the higher figure. Check how your company works this figure out, as it will normally be based on your basic salary, without other benefits or overtime taken into account.

Company pension schemes also offer a good range of benefits for various circumstances. For example, if you take early retirement, you will receive a slightly reduced pension, but you will retain all the standard benefits. If you have to retire due to ill-health, most schemes will be able to pay you a related retirement income. Company schemes also include a life policy, which means that if you die before retirement, your spouse will be paid a lump sum, normally 1-3 times your salary and receive a pension as well.

When you join a new company, it is worth looking at all the benefits it offers to you. Only in certain circumstances will it not be in your interests to join, and if you work for a company for a number of years and then decide to leave, then consider leaving your pension with the company, so that you still get the benefit of the funds you have accrued. In some cases, if your pension scheme has a reasonable level of funding, it may be worth considering a pension transfer to a different scheme. This may be particularly relevant if you are joining a new company that operates a good pension scheme. In order to transfer your pension, you will need to ask for a full transfer value, which will help you to decide whether it will be financially beneficial to you to transfer the funds.

Company pension schemes offer one of the best investment vehicles for your retirement. If you are unsure about your current provision, or you want to discuss pension transfers, then contact our panel of pension transfer advisors. Fully qualified, regulated by the FSA and independent, they can advise you on the best course of action and will be able to use their knowledge of the market to compare funds and benefits and recommend the products that are best for you.