“ Opinions should give advice on what to look for from an occupational pension. Things to consider include Defined Benefit Occupational Schemes vs Defined Contribution Occupational Schemes, AVC and FSAVC's and what constitutes a good scheme. „
A lot has been written about pensions, but there has without doubt been a lot of misselling over the last five years. Many people have been tempted into buying personal pensions by the offers of superior performance by so called Independent Financial Advisors, this is almost always the wrong advice compared to the pension which is offered by one's employer. The most significant advantage of a pension from an employer which NO other scheme can overcome is that the employer nearly always contributes a percentage of salary in addition to the contribution made by the employee, and this additional element of salary can be as high as 15 per cent per year, no outperformance on any other scheme can overhaul this undenying advantage. An additional advantage of an occupational scheme is that there are no other charges, and many occupational scheme pensions also offer inflation indexed features. It is in the personal interest of a company to offer the best possible scheme, and as such they nearly all attempt to ensure that the investment performance of their pension is as high and safe as possible. As always, one should always read as much as the information offered before committing oneself to such a monthly contribution. There are basically two types of Occupational Pension, Defined Benefit and Defined Contribution. Defined Benefit means that contributions are linked to a final pension receivable, whereas Defined Contribution basically means that specific contributions are made with the resulting pension being calculated from those contributions and attached profits etc. It is such points that one should examine. It should not be forgotten that tax is deductible from contributions made directly from one's salary, so this is a significant advantage. Also one should really be in a scheme for approximately 40 years to get the maximum possible pension, and for every year of contributions not made it is very hard to catch this u
p by making excess payments in future years. As a very rough guide one should put about 6 per cent of salary into a pension for maximum benefit, so it can be seen that a few missed years would be very difficult to pull back. Finally, one should always examine the annual statement of benefits given for mistakes and so on. In the unlikely event that someone pays for more than 40 years into a scheme for example, any additional years of payment could be wasted money, as by government legislation the highest pension one can receive is two thirds of final salary and additional payments could exceed this benefit and not be refundable. So please prepare for your future, and read and think about all the options and don't sign anything until all available options have been explored and carefully thought about. If in doubt seek further opinions. Finally, you haven't opened the wrong op...I can do straight one's sometimes.