to join company pension scheme or not...

wijcc · 2 Oct 2007 at 15:56

Need a little advice on whether or not to join the company pension scheme that the company i work for has introduced.. see below for details.

" We obviously took the company's financial performance into account when considering the annual pay rise as always but this year we have also taken account of the fact that we are offering a pension scheme to all staff which involves a company contribution to each member’s policy of around 3.6% of gross salary. We are also aware that this isn't being taken up by everyone and that the national average of private sector company pay awards this year is 3.8%.
In view of this we have decided to award a 2% rise overall for 2007/2008."

I have a mortage which i'd rather pay off early but I'd only get a 2% rise. Can you cash in a pension scheme early, so if i was to join the pension scheme and after a few years cash in my pension to payoff my mortage so taking advantage of the employers contribution to the pension?

Thanks in advance guys

scorza · 2 Oct 2007 at 16:00

Once your money is in a pension scheme it will be locked in until you retire and buy an annuity. Now this annuity may include a large lump sum, which you can use to pay off your mortgage (or anything else - the money is yours at this point), but as I say, you'll have to retire first.

JollyGreen · 2 Oct 2007 at 16:00

I joined mine a few years ago, however it's now become pretty redundant to my life plans and I'm rather hacked off as I didn't realise I couldn't cash it in, at all, until I'm 54 (more than 30 years from now!)
My money, yet they have it

Gaz1988 · 2 Oct 2007 at 16:06

This is quite interesting, my company are offering me a pension scheme also! 3% a month + they will put in 3%. suppose it will suck now, but when your old and retired you will be thankfull for it.

Subby · 2 Oct 2007 at 16:08

Gaz1988 said:
This is quite interesting, my company are offering me a pension scheme also! 3% a month + they will put in 3%. suppose it will suck now, but when your old and retired you will be thankfull for it.

The whole point of a pension scheme.

platypus · 2 Oct 2007 at 16:10

I'd leap at a contributory pension to be honest, they're getting very rare these days.

Haircut · 2 Oct 2007 at 16:11

If they're putting money in then I would take it.

Personally I put the minimum into my pension so that I get all of my employer contributions and then invest any excess myself.

You have to bear in mind that you get tax back on whatever you put into your pension as well.

BigT · 2 Oct 2007 at 16:18

I wish I got an offer of a contributary pension scheme. Unless you have a different life plan for preparing for your retirement (through property investment or other long term investments off your own back) then you should jump at this. You get tax relief on your contribution so every £1 you put in actually adds at least £1.22 to the fund and the company is going to put free money into it.

Axis64 · 2 Oct 2007 at 16:27

JollyGreen said:
I joined mine a few years ago, however it's now become pretty redundant to my life plans and I'm rather hacked off as I didn't realise I couldn't cash it in, at all, until I'm 54 (more than 30 years from now!)
My money, yet they have it

What type of pension is it you have cos whoever told you cant cash it in till 54 was lying, goverment legislation states that as form the age of 50 you can take 25% tax free cash and the rest has to buy an annuity, if you are 50 after 2010 (which you will be) then it will be 55 as it will be changing then.

You could always enquire about SIPPs take a look http://www.pensionsadvisoryservice.org.uk/Specialist_Pension_Arrangements/SIPP/ they are much more flexible