Pensions via workplace

tom24

tom24

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I don't understand such and have no need of same but can anyone explain how these work?
How do they work given that these days people go from job to job and what about those working in firms that go into liquidation?
 
Tom,

The pension is generally a defined contribution pension, which is a policy setup on your behalf by your employer with an insurer. Say for example with Aviva,

You pay and amount each month which is deducted before tax so you pay a slightly lower tax, you employer also pay an amount each month.

If you leave after 3 or more months contribution you take you pot with you, and can transfer to your new employers scheme. Or leave it there till retirement but depending on the type of policy you may have to pay an annual change, so if the pot is small by retirement it may be all gone.

Hope above helps.
 
Complicated (I’m not an independent financial advisor)
A company provides a pension usually through a 3rd party provider (though larger companies may manage their own).
If you leave the scheme your pension will be available when you retire
Your best option may be to keep to the same scheme throughout your career (even if you change employers)
If the company you work for goes bust, there should be protection for the pension scheme (it used to be untouchable, but the Torres like to support entrepreneurs gambling with other people’s money)
 
Transferring is not free though and if you've not got a large pot in a pension it might not be worth moving it.
 
sep9001 said:
Or leave it there till retirement but depending on the type of policy you may have to pay an annual change, so if the pot is small by retirement it may be all gone.

Hope above helps.
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The charge is tiny - less than 0.75% generally so hopefully over the long term the investment return will easily out weigh the charge.

Generally if moving employer it is probably best moving your pension so you can keep track, particularly if you move jobs a lot.

Also the pension pot is completely separate from the company assets and can’t be touched.
 
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A big factor is the employers contribution as well as tax relief on your own contribution it’s something for free so I would always try to take advantage....workplace pensions as said above are through a variety of Providers independent of the company....if you leave you don’t have to transfer...if you change jobs a lot you can always consolidate later on if you have accumulated various “pots” with different employers....( could save on costs) ......smaller amounts can be “ cashed in “ post 55 subject to part being tax free (25%) and the rest added to other income and taxed....NEST seems to be one of the most frequently offered schemes....
 
Thanks but what do normal folk do e.g a retail assistant going to a domestic job in a hotel?

Like i've said, it does not affect me, i'm looking to see how it affects the normal working class, 'cos i can't follow how it works
 
tom24 said:
Thanks but what do normal folk do e.g a retail assistant going to a domestic job in a hotel?
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They carry on working until they die. There is a huge problem with pensions and IMO the workplace pension scheme isn't nearly enough to solve it. We need something truly radical like (1) teaching finance in schools and (2) saying that money is taxed once only. So once you have earned it, it's yours rather than this "lock away some of your money on a tax free bet that you aren't going to die" scheme.

There was a really interesting call into Moneybox yesterday on the theme of "if we have so little unemployment and so many jobs that we can't fill then why isn't pay going up?". The caller who runs a medium business said that basically workplace pensions are swallowing the next several years pay rises. So people aren't taking jobs that would provide a pension because they don't pay enough to live on now.
 
Pensions at present are an absolute nightmare. So many options, so many people all saying different things.

I am relatively lucky having been with the same company for nearly 30 years, consolidated the 2 company pensions into a SIPP and I am retiring at the end of this month just short of my 56th birthday. There is absolutely no way my daughter will be able to do that.
 
Workplace pensions are a brill idea, basically you contribute a certain amount and your employer matches it up to a certain amount.
The pension itself is held by a 3rd party so is safe from being robbed by the employer.

Employers pay 1.0% of your qualifying earnings until 6 April 2018 rising to 2.0% until 6 April 2019 then rising to 3.0%

it is basically free money which they have to pay so make sure you are contributing enough to get the most out of them.
 
And let's remember, no one is forced to have a workplace pension. Employers have to offer one and enrol the employee, but you can opt out at any time.
 
Mr Bump said:
it is basically free money which they have to pay so make sure you are contributing enough to get the most out of them.
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Yes. Free money. Which they could previously use for any other purpose they like such as buying a yacht or giving you a pay rise.

I'm not saying workplace pensions are especially a bad thing, but a lot of employers are going to look at the amount of money they have available to pay staff and realise that if they are spending 3% on a new pension then that's 3% they won't be paying in salary.

Meanwhile small independent companies (like, um, photographers) will either have to opt out of their own scheme or pay money into it. Takes me back to the days when I had to pay a government levy in case the pension trustees (me) did a bunk with all the money the company (me) had paid them to give to the pension scheme members (me). And like most government levies, the main point was to fine people who didn't complete the paperwork on time.
 
viv1969 said:
And let's remember, no one is forced to have a workplace pension. Employers have to offer one and enrol the employee, but you can opt out at any time.
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yes you can but you would be a complete knob to do that unless you had a great plan as you would then not get the employers contributions.
 
Mr Bump said:
yes you can but you would be a complete knob to do that unless you had a great plan as you would then not get the employers contributions.
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Did I say it was a good idea? :rolleyes:
 
viv1969 said:
And let's remember, no one is forced to have a workplace pension. Employers have to offer one and enrol the employee, but you can opt out at any time.
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Mr Bump said:
yes you can but you would be a complete knob to do that unless you had a great plan as you would then not get the employers contributions.
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This
Not to mention that the govt are pushing this as part of their plan to get rid of means tested help for pensioners.

Their policy is that if you don’t save for your pension (when they’ve made it so easy and worthwhile) then why should the taxpayer bail you out.
 
Phil V said:
This
Not to mention that the govt are pushing this as part of their plan to get rid of means tested help for pensioners.

Their policy is that if you don’t save for your pension (when they’ve made it so easy and worthwhile) then why should the taxpayer bail you out.
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But what will they do with people who have opted out? My guess is they will still receive a pension, while those who have saved and paid into a pension will probably end up not receiving anything from the state.
 
rick448 said:
But what will they do with people who have opted out? My guess is they will still receive a pension, while those who have saved and paid into a pension will probably end up not receiving anything from the state.
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Read it again...

They have significantly raised the state pension, to the point it will mean a lot of people will no longer require any means tested pension (carefully calculated).

The whole point of the changes is to do the opposite of what you suggest. So everyone gets a flat rate pension that’s enough to live on, the only way to be comfortable is to have a pension alongside it. The government are pushing everyone to do that so they don’t have to bail people out.

The policy intent fails if people think it’s difficult, or that the govt will step up. That’s why they’re putting so much effort into promoting and supporting workplace pensions
 
Phil V said:
Read it again...

They have significantly raised the state pension, to the point it will mean a lot of people will no longer require any means tested pension (carefully calculated).

The whole point of the changes is to do the opposite of what you suggest. So everyone gets a flat rate pension that’s enough to live on, the only way to be comfortable is to have a pension alongside it. The government are pushing everyone to do that so they don’t have to bail people out.

The policy intent fails if people think it’s difficult, or that the govt will step up. That’s why they’re putting so much effort into promoting and supporting workplace pensions
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Sorry, I got the wrong end of the stick there... maybe due to lack of sleep at the moment.
 
rick448 said:
Sorry, I got the wrong end of the stick there... maybe due to lack of sleep at the moment.
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That’s ok.
It’s the typical upper working class / middle class view of what’s wrong with the current system, that ‘good’ and ‘hard working’ people save for their retirement and the government bails out the feckless and undeserving, those that choose not to save etc. etc.
 
Phil V said:
That’s ok.
It’s the typical upper working class / middle class view of what’s wrong with the current system, that ‘good’ and ‘hard working’ people save for their retirement and the government bails out the feckless and undeserving, those that choose not to save etc. etc.
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I for one would never have paid into a pension from 19 years old unless it had been compulsory (later optional) now 35 years later I have a decent pension which pays out, as well as a new pension with my new employer. I was planning on retiring but a baby girl at 50 changed all that!
 
tom24 said:
I don't understand such and have no need of same but can anyone explain how these work?
How do they work given that these days people go from job to job and what about those working in firms that go into liquidation?
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Why don't you need a pension?
 
HuntingMartians said:
Why don't you need a pension?
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We will all need an income of some sort after we retire from regular work. The state pension won't really be enough to fund the kind of lifestyle you'd like if you have a choice, so you need to make some kind of provision yourself. But technically it doesn't *have* to be a pension. It's perfectly possible to fund your retirement via putting your money in ISAs.

The big advantages of using ISAs are:
(1) No tax to pay when you take the money out.
(2) No restrictions on how much you can take out at what time.
(3) A predictable and stable regulatory environment.

By predictable and stable I mean that future governments might change the rules regarding how much you can invest in any year, but it's inconceivable that they will change (1) or (2).

The big disadvantages of using ISAs are:
(A) You pay income tax on your earnings before you can put it in an ISA.
(B) Your employer won't contribute anything directly to it.

(A) can be something of a gamble - will your marginal tax rate be higher now or when you retire? - and (B) might be a big deal. But when you look at the changes in the pensions regulatory environment over the last 10 years, such as the introduction of a lifetime allowance and the collapse of annuity rates, and you wonder about what else might happen to pensions over the next "N" years before you retire, then there's an argument in favour of the predictability of ISAs.

Disclaimer: This is not financial advice. I am not a financial advisor or any kind of finance professional. You should never take financial advice from a stranger on the Internet.
 
StewartR said:
We will all need an income of some sort after we retire from regular work. The state pension won't really be enough to fund the kind of lifestyle you'd like if you have a choice, so you need to make some kind of provision yourself. But technically it doesn't *have* to be a pension. It's perfectly possible to fund your retirement via putting your money in ISAs.
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There are also lots of other ways of funding your retirement; a lot of my mates bought houses and now rent them out, this gives them an income at the moment, but come retirement time they will be paid off. One has 12 houses which are currently worth £2.1 million. He has 7 years to wait until the last one is paid off, so it's likely that value will increase slightly. His options then are to live off the £7,800 a month he currently receives in rent. Or sell them, I'd say thats quite a provision. I wish I'd gone into t with him when I had the chance.... nevermind.
 
rick448 said:
There are also lots of other ways of funding your retirement; a lot of my mates bought houses and now rent them out, this gives them an income at the moment, but come retirement time they will be paid off. One has 12 houses which are currently worth £2.1 million. He has 7 years to wait until the last one is paid off, so it's likely that value will increase slightly. His options then are to live off the £7,800 a month he currently receives in rent. Or sell them, I'd say thats quite a provision. I wish I'd gone into t with him when I had the chance.... nevermind.
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He will have to pay CGT on his portfolio when he sells the properties though so that will reduce some of its value, not to mention solicitors and Estate agency fees, but probably still have been a good investment.
 
rick448 said:
There are also lots of other ways of funding your retirement; a lot of my mates bought houses and now rent them out, this gives them an income at the moment, but come retirement time they will be paid off. One has 12 houses which are currently worth £2.1 million. He has 7 years to wait until the last one is paid off, so it's likely that value will increase slightly. His options then are to live off the £7,800 a month he currently receives in rent. Or sell them, I'd say thats quite a provision. I wish I'd gone into t with him when I had the chance.... nevermind.
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Yes. At one point the government were actively advising people to do this with their pension pot. The plan seemed to be to move your money from the most heavily regulated and secure sector (pensions) into the least (the wild west of property).

A year or two later of course the government decided that people who followed their advice were evil parasites who must be crushed and so brought in a whole raft of tax changes to punish people who have done this.
 
MatBin said:
He will have to pay CGT on his portfolio when he sells the properties though so that will reduce some of its value, not to mention solicitors and Estate agency fees, but probably still have been a good investment.
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Well tax is just an occupational hazard, assuming you have an occupation of course!
 
JonathanRyan said:
Yes. At one point the government were actively advising people to do this with their pension pot. The plan seemed to be to move your money from the most heavily regulated and secure sector (pensions) into the least (the wild west of property).

A year or two later of course the government decided that people who followed their advice were evil parasites who must be crushed and so brought in a whole raft of tax changes to punish people who have done this.
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Unlike a government to screw people who want to make a few quid and not live off the state, I am shocked ;)
 
StewartR said:
We will all need an income of some sort after we retire from regular work. The state pension won't really be enough to fund the kind of lifestyle you'd like if you have a choice, so you need to make some kind of provision yourself. But technically it doesn't *have* to be a pension. It's perfectly possible to fund your retirement via putting your money in ISAs.

The big advantages of using ISAs are:
(1) No tax to pay when you take the money out.
(2) No restrictions on how much you can take out at what time.
(3) A predictable and stable regulatory environment.

By predictable and stable I mean that future governments might change the rules regarding how much you can invest in any year, but it's inconceivable that they will change (1) or (2).

The big disadvantages of using ISAs are:
(A) You pay income tax on your earnings before you can put it in an ISA.
(B) Your employer won't contribute anything directly to it.

(A) can be something of a gamble - will your marginal tax rate be higher now or when you retire? - and (B) might be a big deal. But when you look at the changes in the pensions regulatory environment over the last 10 years, such as the introduction of a lifetime allowance and the collapse of annuity rates, and you wonder about what else might happen to pensions over the next "N" years before you retire, then there's an argument in favour of the predictability of ISAs.

Disclaimer: This is not financial advice. I am not a financial advisor or any kind of finance professional. You should never take financial advice from a stranger on the Internet.
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I am confused at why this is directed at me.

I asked that user why they felt like they didn't need a pension.
 
rick448 said:
Unlike a government to screw people who want to make a few quid and not live off the state, I am shocked ;)
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Oh how thin a veneer needs to be to hide reality from the gullible.

Buy to let looked like a great thing for government, removing the ‘burden’ of ownership from local authorities, but it helped fuel a housing bubble, which pushed up rents, which then cost the government (yours and my money) loads because the working poor and sick and unemployed are entitled to help with their rent, which meant the market couldn’t regulate its own value.

The clearly obvious reality is that benefit recipients are only conduits of our taxes on their way to rich landlords. So the Daily Telegraph view of Landlords being squeezed by the taxman could be countered by the view that it’s all a right bloody mess that largely results in the rich siphoning ever greater amounts of money from ordinary hardworking taxpayers.

The people ‘living off the state’ really well are Landlords and SME employers underpaying their staff because the taxpayer picks up the slack.
 
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Phil V said:
Oh how thin a veneer needs to be to hide reality from the gullible.

Buy to let looked like a great thing for government, removing the ‘burden’ of ownership from local authorities, but it helped fuel a housing bubble, which pushed up rents, which then cost the government (yours and my money) loads because the working poor and sick and unemployed are entitled to help with their rent, which meant the market couldn’t regulate its own value.

The clearly obvious reality is that benefit recipients are only conduits of our taxes on their way to rich landlords. So the Daily Telegraph view of Landlords being squeezed by the taxman could be countered by the view that it’s all a right bloody mess that largely results in the rich siphoning ever greater amounts of money from ordinary hardworking taxpayers.

The people ‘living off the state’ really well are Landlords and SME employers underpaying their staff because the taxpayer picks up the slack.
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But that can apply to all things which are in a competitive market. From the cost of food, to the price of Sky TV. I'm not going to apologise for my opinion that I think it is wrong for those working to be paying more and more towards those who choose not to. Not that this is a new thing, my sister in law gets the equivalent of £32K a year in benefits and lives a pretty nice lifestyle. She gets a carers allowance for looking after her daughter, who in turn gets the same for looking after her mother.... how on earth can that make any sense. She is 38 years old and has never worked a day in her life, and never will. Anyway, she won't need to worry about pension because someone else will be paying that for her.

With regard to low pay, I agree with you on that, however increasing the minimum or living wage does nothing in the grand scheme of things, all that will happen is that inflation will rise as the pay gap between skills will need to be maintained unless companies want to lose higher skilled workers. This has already happened where I work, and a number of staff have left, and now others have been given additional pay, which has now bumped up prices.

I have no idea why the answer is, clearly there are highly intelligent people running the county (or on this forum ;) )who know the answer to that. But it seems they are hiding the solution! :)
 
Phil V said:
Buy to let looked like a great thing for government, removing the ‘burden’ of ownership from local authorities, but it helped fuel a housing bubble, which pushed up rents, which then cost the government (yours and my money) loads because the working poor and sick and unemployed are entitled to help with their rent, which meant the market couldn’t regulate its own value.
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I'm just wondering if we couldn't come up with some sort of bold plan where local authorities actually commissioned the building of houses. They could save costs by making them uniform and streamlining planning and negotiate a great deal with the builders because they guarantee to buy the whole development. Then, instead of encouraging entrepreneurs to own them and charge the council rent, the council could own them and provide them to people whose rent they would normally pay to live there free (or at reduced rent as their income rose). They could make sure the houses were safe and well maintained and all at a lower cost since they would cut out a couple of layers of profit.

Oh, hang on a minute........................
 
JonathanRyan said:
They could make sure the houses were safe and well maintained and all at a lower cost since they would cut out a couple of layers of profit.
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How about making the garden large enough so that a family could be self sufficient with vegetables.... what a totally radical modern idea
 
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