subject: Occupational Pension Schemes Made Easy [print this page] Occupational Pension Schemes Made Easy Occupational Pension Schemes Made Easy
It is imperative nowadaysthat we think about our pension plans as young as possible but with so many choices it can be challenging to understand the complexities of them all. This brief guide will introduce you to occupational pension schemes, what they are and their benefits.
What are occupational pension schemes?
Occupational pension schemes are likely to be one of the following:
Contributory occupational pension schemes
Non contributory occupational pension schemes
Open stakeholder schemes
With a contributory scheme you'd give part of your earnings to the scheme together with a contribution from your employer. A non contributory scheme would involve only your employer paying into your pension scheme. Lastly, the stakeholder occupational pension scheme, where you make all the contributions, these are there since employers with more than a certain number of employees have to offer a pension scheme, however they are not required to make any contributions .Understandably these aren't popular!
If you get the chance to join an occupational pension scheme then you should, especially if your employer is going to top up your contributions. You can think of it being a little bit more in your wage packet each month (which you cannot touch for a while).
Some of the major benefits with the occupational pension schemes are:
If you stop paying into your pension scheme when you change jobs, you can leave it to carry on growing
If you feel your contributions will not provide you with a adequate return to retire comfortably it is possible to decide to make further contributions. This is known as Additional Voluntary Contributions, which is commonly abbreviated to AVCs
Occupational pensions will usually (but not always) give a generous death benefit if you die before the age of retirement
If you get the chance to join an occupational pension scheme, then you should do so. If you work for a small company where an occupational pension isn't a choice then you definitely need to think about a private pension plan to give you security in retirement.
There are two basic types of occupational pension scheme:
Final Salary Schemes once you retire you can receive a particular level of pension. Not many company's will offer you this type of pension these days, it is typically only found in the public sector nowadays.
Money Purchase Scheme you'll have a pot of money for when you retire, but the amount depends upon factors like; moneys paid in, investment and annuity.
Although it is not compulsary that you join your workplace occupational pension scheme, as you have seen it can be beneficial to do so. Planning for the future is more crucial now than it has ever been and it is imperative that you take every financial opportunity you get.
