You can take it with you

Pensions

If you are thinking of changing jobs in the new year, do not forget to check out the pension arrangements . An occupational pension scheme to which the employer contributes on your behalf, can add several thousands of pounds to your package.

With more than eight out of 10 people now believing that the Welfare State is unable to provide adequately for them in retirement, a good company pension could well be the best perk you will be offered.

Occupational pension schemes run by employers fall into two camps, final salary and money purchase schemes.

Final salary schemes are the most common type of company scheme. On retirement employees receive a fraction of their final salary for each year they have worked for their employer. The maximum pension you can receive is two-thirds of final salary.

Most schemes work on a 1/60th basis, which means you will have to be with your company 40 years to receive the maximum pension of two-thirds of your final salary. When you reach retirement you will be given the opportunity of turning part of your pension entitlement into a tax-free cash sum.

Alternatively, your occupational pension scheme may be money purchase. With this type of scheme you pay a certain amount of your salary into the scheme each month, usually 4 per cent of earnings, and your employer contributes an extra 6 to 8 per cent of your earnings.

This money is then invested for you to provide a pot of money when you reach retirement. Your company will usually ask an insurance company to invest the money for you.

The value of your pension pot at retirement will be based on how well your investments have performed and not, as with a final salary scheme, on how much you are earning when you reach retirement or how long you have been in the scheme.

When you come to retire you will be able to take some of the money in your pot as a tax-free lump sum and the rest must be used to buy a retirement income known as an annuity. You can buy the annuity from a number of insurance companies - it does not have to be from the same company as you built up your pension pot with.

Whether your employer operates a final salary scheme or a money purchase scheme you should find out how much pension income you can expect when you retire.

To do this write to the trustees of your company pension scheme and ask for a forecast of how much your annual pension will be at retirement. To find out who the trustees of your pension scheme are, ask your manager or personnel officer.

Those in a money purchase scheme should receive details each year from their trustees, who should tell you how much your pension fund is worth, how the investments are performing and what size of annual pension you should be able to afford with your pension fund.

Members of a final salary scheme need to ask their pension trustees for details of what level of retirement income they are on course for.

Most of us change jobs five or six times during our working lives. When you leave a company pension scheme, so long as you have been in it for at least two years, you will be able to decide what happens to those contributions. If you want your contributions to stay in the existing scheme you should contact the trustees of the scheme to find out the amount of pension you can expect from those contributions at retirement. Alternatively, you may decide to transfer your contributions to your new employer's scheme.

To track down the trustees of your former company pension schemes, contact your old employer and ask for the details. If your former employer has gone out of business contact the Registrar of Pension Schemes (0191-225 6393), which should be able to trace trustees.

Once you have details of all the pension schemes you can expect to receive a pension from when you retire, you can then calculate what your retirement income is on course to be.

If you have contributed to only a few schemes this should be quite easy. But if you have pension contributions in several different types of schemes, you may well need help in working out your projected pension.

Your pension department at work should be able to help you. Alternatively, you could speak to an independent financial adviser but be prepared to pay between pounds 100 and pounds 300.

How members of company schemes will gain control next April

In April next year a new Pensions Act will come into force. This will overhaul occupational pension schemes and should give scheme members more financial security.

One of the changes to be introduced will be the indexing of pension benefits. Broadly, for many people in a final salary scheme, this will mean that when they retire their pension payments will rise in line with inflation (up to 5 per cent) each year. Those in money purchase schemes will also have an index-linked pension.

The new Act is expected to lead to pension scheme members having more say in how their scheme is run.

Pension scheme members will have the right to nominate up to one third of their scheme's trustees.

The Act also raises the state pension age for women to 65 from the year 2020. And pension rights will now be taken into account when a couple divorce.

The role of pension scheme trustees is to be extended to ensure that they monitor the pension scheme closely and keep members in touch with any changes occurring in their scheme.

The Pension Act is expected to have most effect on final salary schemes. Employers offering these schemes could face higher administration and funding costs.

The likely result of this is that a number of employers will switch from offering a final salary scheme to offering a money purchase scheme.

Abigail Montrose

PROMOTED VIDEO
News
Johnny Handle, Northumberland, Ted Relph, President of Lakeland Dialect Society, and Sid Calderbank, Lancashire, founder of the National Dialect Day
newsMeet the enthusiasts determined to stop them dying out
News
The data shows that the number of “unlawfully” large infant classes has doubled in the last 12 months alone
i100Mike Stuchbery, a teacher in Great Yarmouth, said he received abuse
Arts and Entertainment
The starship in Star Wars: The Force Awakens
filmsThe first glimpse of JJ Abrams' new film has been released online
Sport
Rio Ferdinand returns for QPR
sportRio Ferdinand returns from his three-game suspension today
News
The Speaker of the House will takes his turn as guest editor of the Today programme
arts + ents
News
ebooksNow available in paperback
Arts and Entertainment
St Peter’s Seminary in Cardross. Argyll, has remained derelict for more than 25 years
arts + ents
News
people

Watch the spoof Thanksgiving segment filmed for Live!
Sport
Billy Twelvetrees will start for England against Australia tomorrow with Owen Farrell dropping to the bench
rugbyEngland need a victory against Australia today
Arts and Entertainment
The cover of The Guest Cat – expect to see it everywhere
books
Sport
Tyson Fury poses outside the Imperial War Museum in south London ahead of his fight against Dereck Chisora
boxingAll British heavyweight clash gets underway on Saturday night
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.

iJobs Job Widget
iJobs Money & Business

Austen Lloyd: Company Secretary

Excellent Package: Austen Lloyd: EAST ANGLIA - SENIOR SOLICITOR LEVEL ROLE** -...

Citifocus Ltd: German Speaking Client Specialist

£Attractive Package: Citifocus Ltd: Prestigious asset management house seeks a...

Citifocus Ltd: Performance & Risk Oversight

£Negotiable: Citifocus Ltd: This is a varied role focusing on the firm's mutua...

h2 Recruit Ltd: Sales Director - SaaS (SME/Channel) - £140,000 OTE

£90000 - £140000 per annum + benefits: h2 Recruit Ltd: Are you a high achievin...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game