For the last year since graduating, I have been paying 6% and my employer 12.8 into a final salary pension. I know I can transfer this to another scheme if I move job, as long as it is a final salary scheme, but would I be better investing my money in the stock market so I have more control, albeit exposed to more risk?

Final Salary schemes are the best type of pension scheme available which is why employers are shutting them down. The only problem with them was if the employer wasn't making the contributions they said they were and the employer goes bust - there was no one to make up the shortfall to pay the pensions. But the govt recently announced they are going to fund a scheme for victims of final salary schemes.

The thing about the schemes is the amount of your pension is guaranteed, no matter how badly the scheme does! Employers have to make up any shortfall. This is why there are so many problems as in good years many employers stopped contributing, since the last market drop have not paid enough to cover the "guaranteed pensions" - hence the need to stop new entrants so they can catch up!

You would be silly to opt out - as there is now little risk of you losing out.

There is always a risk that it won't be there when you retire.

Recently, it was reported on news24 & channel 4 that you have no guaranteed legal right to the money.

http://www.channel4.com/news/2004/special_reports/30mins_pension_threat.html

apple - that was until last week, when the government gave into pressure about Final Salary schemes being wound up and people losing their guarantees.

The Pensions secretary Andrew Smith announced the details of a trust fund, initially funded with 400 million of public money to compensate people who have lost out after schemes have been wound up.

http://www.channel4.com/news/2004/special_reports/30mins_pension_threat.html

How safe is your pension?
30 Minutes

Published: 05-May-2004
By: Channel 4

Nine million people in this country, young and old, pay a slice of their wage into final salary occupational pension schemes. But Channel 4's economics correspondent Liam Halligan reveals that most people don't realise they have no legal right to that pension money whatsoever. And some people have lost the lot.

"How safe is your pension?" broadcasts on Channel 4, Sat May 8th, 6pm

That compensation fund only gives 90% of the money back & the government said that it will be a lower % if there are a lot of claims.

That could be 0% if more than 400 million claimed.

It is not a blank cheque.

As channel 4 said, most people don't realise they have no legal right to that pension money whatsoever.

Liam Halligan of channel4 was not particularly impressed by the compensation scheme.

The details were as discussed in the programme.

The announcement was as expected.

Pension Letter - Download
30 Minutes


Published: 05-May-2004
By: Channel 4



Pensions lawyer Stephen Alexander has drawn up a legal letter, which employees can send to the people who are running their pension funds.



Copy and paste the below text. Complete it by filling in your employer's name in the relevant spaces. Address it to the Chief Executive or Chairman of the company:



Dear [insert Chief Executive/Chairmans name here],



I am a member of the final salary pension scheme of [insert your company name here] and am writing to you to seek clarification of my position as a member of the Scheme and confirmation from you as to its continuation in the future.



Please can you confirm by signing a copy of this letter that:



1. The Board of Directors fully understand that the Scheme is a vital part of my pay package and that I have planned my financial future based on the returns that I have been told will be paid to me on retirement;



2. That as at todays date there are sufficient funds in the Scheme to pay my full entitlement;



3. No steps will be taken by [insert your company name here] to worsen my financial position inside the Scheme;



4. [insert your company name here] will take no steps to wind up the Scheme to my detriment;



5. If at any stage during the life of the Scheme, [insert your company name here] is sold or subject to any material change in ownership that my rights under the Scheme will be fully protected;



6. No members of the Scheme will be treated preferentially or in any manner differently from other members of the Scheme;



7. That the Board of Directors of [insert your company name here] have taken all reasonable steps to satisfy themselves that the pension review and monitoring requirements are in place as required by Law.




Yours sincerely

apple, all the stuff you are quoting is dated May 5th, even the programme was transmitted on the 9th, which you have mentioned that the announcement was expected, as they were speculating what would be in it.

All of this was BEFORE the announcement on the 14th of May as well the date the actual bill was published - on the May 12th, so that it could go forward for parliament approval. So no one knew any of the full details until the 12th.

Either way even if you only get 90% of the guarantee, thats a lot more than many will get because they have no guarantee of getting anything.

One of the scandals of the from the late 1980's was pension mis selling.

And it consisted purely in relation to anyone in a company pension (especially a final salary scheme) who was convinced to opt out the scheme. They were automatically compensated so they could go back into the scheme because by opting out, it was widely accepted, they were worse off.

Anyone care to comment on the pension situation now in the UK?



Wednesday, 4 April 2007, 11:09 GMT 12:09 UK

http://news.bbc.co.uk/1/hi/business/6525587.stm

Pensions 'not better than ISAs'

ISAs are more flexible than pensions
Millions of Britons could be better or equally well off investing in an Individual Savings Account (ISA) rather than a pension, a report has said.
The report from website Everyinvestor.co.uk goes against many experts' view that pensions are best because contributions enjoy tax relief.


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The arguement goews back and forth. But my problem is a little nearer to home.

My daughter has recently joined a company on a graduate scheme.

The pay and perks are pretty good, however this company only offers a money purchase pension scheme.

The company will pay a contribution of 6.6% of your salary, and you contibute 5.40% (min) towards the scheme. Tax relief makes this lower.

Ther are no guarantees as to what you will recieve when you eventually retire.

Which of course is the main problem. Do you hand your money over to the city gents and hope for the best? Or try for a different solution?

My own experience with "managed" funds is awfull...ie, a so called endowment, which cant even keep up with high street bank deposits. (RSA)


Any suggestions?