Successful, single and (when it comes to pensions) falling apart

How to pull yourself together with a pension plan that accommodates your lifestyle. By Jane Slade and Maisha Frost

Young, successful and desperately seeking a lifelong partner. You don't need to be a real-life version of Ally McBeal or Bridget Jones, or a male equivalent, to fall into this category. All it takes is a healthy instinct for financial self-preservation, particularly where your eventual retirement is concerned.

Unless single people manage to find someone to share their days with or - more importantly - are prepared to plan ahead for the day they will no longer be working, they could well find their finances, and their lives, falling apart.

Single people are more likely to change jobs and move home more often than married couples. But the way pensions are presently structured means that pension schemes, particularly company ones, often fail to reflect this fact.

As Muriel Sime, technical specialist at the Occupational Pensions Advisory Service, explains: "You pay the same pension premiums as someone who is married, but as a single person you [may] lose out because you cannot nominate a beneficiary. If you are married, your spouse is automatically that person."

The position is worse if you cohabit, no matter how long for, and your partner dies. Were that to happen, you may be denied a widow(er)'s pension under the pension fund's rules.

Ms Sime adds: "I do come across many single people who feel aggrieved about this and feel they are being discriminated against. In some cases the balance is redressed in that a dependent can benefit, but not a friend or colleague."

Under this system, practiced by many private-sector employers' schemes, it is possible to nominate a dependent as beneficiary of your pension. Yet not all companies do this and - to the bafflement of many in the public sector - their schemes, including those for police officers, nurses and civil servants, also refuse to allow unmarried dependants as beneficiaries.

Robert Guy, technical director of independent financial-advisor John Charcol, explains that: "While the discrimination cannot be disputed, premiums with company pensions would rise substantially if everyone could nominate a beneficiary. Such costs are not built in, to pay for them everyone would get less value." Potential discrimination does not end there. Many company-pension schemes offer so-called "defined benefits". This means they pay a proportion of people's final salaries at retirement, linked to the number of years they have worked there.

Such schemes clearly benefit those who remain with one employer for most or all of their working lives, retiring on a high final wage. But for many young single people, career mobility leads to repeated job-switching. In turn, this may mean that they will end up with 10 or even 15 years' worth of mini-pensions, each reflecting the relatively junior positions they held in that firm until they left. Even if they acquire more senior status - and are perhaps no longer single - they will not have enough seniority to build up enough years' worth of pension entitlements.

While not usually as generous as final-salary schemes, many companies now offer "money-purchase" pensions. This allows contributions from both employer and staff to be invested so that the final pension-pot buys everyone an income at retirement, regardless of their marital status. This option also allows people to nominate beneficiaries, although, again, the value of the initial pension will fall, since the pension provider will base its pay-out on the expectation that it will have to make it for longer.

Many companies now offer employees personal pension plans that in theory are transferable to another employer. These are known as group personal pensions". In practice they are not always flexible.

Michael Kirk, an independent pensions adviser at Michael Kirk and Partners, says: "Another company may not take [that pension] on, often citing administration problems. People then have no choice but to seal the old pension and go with the new one."

Those who have a personal pension, but may join a company scheme at some point, should consider a plan that can be converted into a top-up scheme.

Despite these disappointments, it is rarely a good idea for single people to opt out of a company pension scheme and into a personal one. The exception might be in cases where a person knows he or she is unlikely to remain with an employer for more than a year or so at the most. It can make sense for, say, gays or lesbians - who are not allowed to nominate same-sex partners as beneficiaries - not to subsidise pension payments for married couples.

Private-pension companies are adjusting to the increasing likelihood of singledom for increasing proportions of the population. Iain Oliver, pensions development manager at Commercial Union, says: "There is no doubt pensions have been rather guilty of lagging behind and not recognising the way people live and work now. Few people stay with one company for life and many divorce or prefer to live together.

"Our policies have had to change over the past three years to reflect this. It's the provider who has to take more risks now, before it was the client."

Gordon Maw, marketing manager at Virgin Direct, says his company's plan has been designed to meet those contemporary needs. "What people need most is value, no penalties and good returns. We get a lot of 24-35 year olds come to us and most don't know what they will be doing in 10 years' time, let alone 30. For singles the rule is you need a savings plan that is flexible enough to accommodate whatever you may need in the future, but not penalise you when you do it."

Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
News
peopleMathematician John Nash inspired the film Beautiful Mind
News
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Life and Style
Audrey Hepburn with Hubert De Givenchy, whose well-cut black tuxedo is a 'timeless look'
fashionIt may be a paradox, but the industry loves it
Arts and Entertainment
The pair in their heyday in 1967
music
Life and Style
fashionFrom bathing dresses in the twenties to modern bikinis
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Guru Careers: Software Developer

    £35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

    SThree: Trainee Recruitment Consultant / Resourcer

    £18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

    Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

    £25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine