Company Pensions - FAQ

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Introduction

If you have a question to which you cannot find an answer in the pensions guide then please fill in a Frequently Asked Question (FAQ) request form.  If we think your question is likely to be a popular one we will add it to either the FAQ section of the site or incorporate it into the pensions guide. We can not promise to answer every question posted but if we do answer one then we will try and let you know where to find the answer via email. If you require individual financial advice then click here to be contacted by a qualified financial adviser.

FAQ as of 07 August 2008

Q1 - Level of contributions - How much money should I put into my company pension scheme? A1 - There are two types of contributions you can pay into company pension schemes. The first are those which are a condition of membership and the second are any additional contributions you want to pay to build up more pension. The amount of additional contributions you need to pay depends upon what level of pension you believe you will need in retirement. Generally if additional contributions paid by you also result in additional contributions being paid by your employer then it is a good idea to pay more. If you need specific advice about the level of contributions you need to pay then seek Independent Financial Advice. Read more about company scheme contributions  in the pensions guide. Q2 - Can I take out a stakeholder pension? - I am currently in my employers (NHS) pension scheme can I also take out a stakeholder pension? A2 - If you are in your employers pension scheme then you can only take out a stakeholder pension if you earn less than £30,000 per year. This is covered in the pensions guide, here. Q3 - What is the difference between an 'approved' and an 'unapproved' scheme? A3 - An approved pension scheme is one for which the Inland Revenue has given its approval to the scheme seeking tax relief on contributions and investment income. The Inland Revenue will only approve schemes which meet certain criteria. Company pension schemes, personal pensions, stakeholder pensions are all approved schemes. Many people will never encounter unapproved schemes as they tend to be setup for company executives. Unapproved schemes are generally set up under trust so what you can and cannot do with the pension will be dictated through the Trust Deed. If you have substantial approved and/or unapproved benefits then you should employ a financial adviser before taking any financial decisions. Q4 - I have paid into various company pension schemes over my life but have lost track of many of them. Where can I find information on these? A4 - The best people to contact are The Pension Scheme Registry. The pension scheme registry is a huge database of pension schemes in the UK. They provide a free service to track lost pensions. Q5 - I have paid into various company pension schemes over my life but have lost track of many of them. Where can I find information on these? A5 - The best people to contact are The Pension Scheme Registry. The pension scheme registry is a huge database of pension schemes in the UK. They provide a free service to track lost pensions. Q6 - Is it wise to take tax free cash at retirement in exchange for pension? A6 - Unfortunately the answer to this question will depend heavily upon the terms that your pension scheme offers and your personal circumstances. If you thinking about taking some of your pension as cash we would suggest you seek out independent financial advice before making a decision. Q7 - My company has contracted me out of SERPS/S2P as a condition of my membership of their company pension scheme. Can I make payments to top this up? A7 - You are either contracted-out or contracted-in. If your scheme has contracted you out as a condition of membership of their pension scheme then you cannot make payments to earn SERPS/S2P accrual. However this does not stop you making payments to some other form of pension vehicle (i.e. either AVCs or stakeholder if appropriate). I suggest you seek independent financial advice on viable alternatives. Q8 - My company pension scheme has recently said they are no longer paying "discretionary increases" on my pension. Can they do this? A8 - Discretionary increases to pensions are something extra the Trustees have decided to give scheme members because they believed the fund could afford to do this. They are something above and beyond what you are entitled to by right and so the Trustees are well within their rights to stop paying them. Think of them as a bonus you have received in the past rather than as something you have lost in the future!