1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160 
WHAT ARE THE SCHEMES? WHICH WOULD SUIT YOU?
Page 47
If you've noticed an error in this article please click here to report it so we can fix it.
Final-salary scheme (aka defined-benefits
■ cer-9/1.1
Many of these schemes are being wound up or at least closed to new members. They are linked to your final salary and length of service to company. All the risk is with your employer, as it is obliged to make up any shortfall from investments as you retire.
Most firms will make sure employees don't lose what they've accrued already when they switch to money-purchase schemes. If you envisage a significant shortfall, It's best to seek independent financial advice.
Money-purchase scheme (aka definedcontrbutis
Occupational:Run on behalf of a company. Employer must set up fund under trust and act as trustees. Employers make no promise on your return and there is no risk to the employer
as It is not funding the scheme. The firm may pay in 5%, while the employee pays in 2%. The employee chooses which fund to invest in, results depend on what the markets do. There is no cap on liability.
Stakeholder: Run through the insurance company, rather than your firm. Best for smaller firms as tt avoids the need for a board of trustees and all other administrative costs. Charges are low at a max of 1%. They are flexible—they can follow employees to other firms and staff can also stop contributing at any time with no penalties.
Personal k
(ovum) Not as simple as the stakeholder scheme but seen as a possible incentive to recruit staff. The scheme Is administered by the employer but the Insurance company does most of the paperwork and no trustees are required. Firms are legally required to contribute at least 3% of employees' salary into scheme.
If you're an employee:
The advice from the Pensions Advisory Service for employees Is to Join whatever option your employer offers—if they're contributing something to it.
If they're offering a nominated stakeholder pension but not paying Into it, you could shop around yourself and choose your own. Or Join theirs and get your own, too.
Large firms should opt for money-purchase schemes. Contributing could be a good way of recruiting and retaining workers.
Small firms should opt for a stakeholder scheme—it entails minimum paperwork and administration costs.