Who pays for company pensions and
why ?
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Company pensions are pension schemes run by an employer
for the benefit of their employees. Employees are generally
referred to as members of the Scheme. They
are generally paid for by the employer, depositing money
(contributions) into a fund. In many schemes the
employee may also be required to contribute. It is normal for
these contributions to be invested in a fund held separately to
the assets of the company. This fund is then used to
provide a pension for the employee when they come to retire.
Different companies provide pension schemes for different
reasons. Many companies have pension schemes to remain competitive
in their industry and attract and retain the best employees. Other
employers may have a paternalistic attitude towards their
employees and wish to ensure they have a comfortable life after
leaving the company. The reasons for providing pension schemes are
not really important for most people what matters is that they
exist and they can be source of additional income in retirement.
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Does an employer have to provide a pension scheme
and at what age can I get my pension?
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If a company has more than 5 employees then it must provide a
pension scheme by law (the bare minimum is the provision of a
Stakeholder pension). Great you might be thinking, pensions
for almost everyone who works! However its not quite that
wonderful. Whilst companies with more than 5 employees must
provide a pension scheme this does not mean that they must put any
money into it. Oh dear.
Therefore whether a company provides you with a pension scheme
into which they put any money is the option of the company.
However that said most sizeable companies have some sort of scheme
available. In summary it is up to the company involved whether
they choose to reward you with a pension scheme to which they
contribute.
Normal Retirement Age (NRA) is the age at which you can start
to receive your pension by right. Different schemes have different
NRA's but they must always be between 60 and 75 otherwise the
Inland Revenue will not approve the scheme. However this does not
mean you cannot take your pension any earlier or later but whether
you can or not (and the terms on which this is available) will
depend on each individual scheme.
The earliest you can start to receive your pension is age 50
(unless you retire due to ill-health in which case you can start
to receive your pension before 50), this is the law. However you
can generally take your pension as late as your scheme will
permit.
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related question then please let us
know.
If it's something other people
would find useful then we will post an answer in our Frequently Asked Question
(FAQ) area.
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Read the guide to
investment in the pensions guide. It explains what you need to
think about before investing for your retirement.
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