Pensions

[sammd]

Could someone please explain pensions to me? I have a company pension and understand that when i retire i'll get some money each month. Around how much money will an average person get a month? And do i still get a state pension aswell as the company one? Do you need to do a certain number of years work to qualify for a state pension and do these have to be continuous years?

[dzug]

Your first question about a company pension scheme is so general as to be unanswerable. Your best bet is to contact the company pension scheme administrator. They are obliged to tell you how their scheme works - in fact I'm surprised they haven't already.

The second question is easier - yes you will get a state pension as well, yes you do have to do a certain number of years work (or get NI credits) to get it, but no, these do not have to be continuous years. It's something like 11 years for any pension at all and 44 years for a full pension.

[sammd]

Thanks dzug. Would working part time when i was at uni count as a year working or does it have to be full time work and say if i worked for 3 months full time every summer, would these be added up to make a year?

I know my first question is a bit general but i was just wondering around how much you have to live off a month when you retire. Are there figures available for the part and full state pensions?

[Ethel]

It is impossible to answer you, sammd.
It is not the fact of working that qualifies a person for a state pension, it is paying National Insurance contributions that count.

If you have worked all your life 'on the side' without paying NI you will not get a pension.
If you haven't worked but have paid voluntary NI contributions you will.

The current basic state pension is �82.05 per week.

[WendyS]

There are two types of company pension scheme: the Final Salary (i.e. defined benefit) and Money Purchase (i.e. defined contribution). The Final Salary scheme will pay a specific amount, i.e. probably one sixtieth of your salary for every year of service in which you have belonged to the scheme, although some schemes will deduct the amount of the State Pension from this.

The Defined Contribution scheme is where you pay your pension contributions into a pot and when you come to retire, yours and the company's contributions will be used to buy an annuity, i.e. whatever that amount of money will buy on the open market at that time with current annuity rates.

Your employer should have given you a pension booklet explaining the type of scheme in detail. Generally you can pay extra money (known as Additional Voluntary Contributions) into your scheme to increase the value of your eventual pension. Do this if you can afford to as you may want to retire early, or be made redundant in the later stages of your working life and not find it easy to get another job, in which case you pension will be vital. In such cases, if you are in a Final Salary Scheme, your pension will be discouted, probably by up to 5% per year for every year below 60 or 65 that you take it. (Some schemes offer retirement at age 60 but many are now moving the goalposts to 65)

[WendyS]

Forgot to mention, and I don't know how old you are, but most people move around during their working life and can contribute to several different company pension schemes. Do make absolutely sure that if you change jobs and change your home address you ALWAYS notify all the pension scheme administrators in every company, keeping a note of your pension scheme reference number. Otherwise you might reach retirement age and find it very difficult to track down your full pension entitlements. I believe pension scheme trustees are supposed to send out annual pension statements to all their members (including Deferred Members, i.e. those who have left the scheme) but if they don't have current addresses for Deferred Members, this can't happen.

[sammd]

Thanks for the info. I have been sent info on the company pension scheme but i don't understand a word of it. If you move jobs is it best to transfer the money into your new pension scheme or keep lots of separate ones?

[dzug]

Would working part time when i was at uni count as a year working or does it have to be full time work and say if i worked for 3 months full time every summer, would these be added up to make a year?

Working part time at uni would count only if you earned enough to pay NI contributions

Working full time in the summer might count if you paid enough NI (there is a minimum to make the year count - not sure what it is). They would not add the three months each year to make one - it has to be in one tax year. At best it would count as 3 years, at worst none.

Your other question about moving your pension (or not) is unanswerable. It depends on your circumstances and the particular pension schemes involved. Sometimes it pays to move the pension, others to leave it where it is. There is no right answer.

I

[sammd]

Sorry for all the unanswerable questions :o)

But thanks for all the info, very helpful.