Plus Points: Employers normally meet some or all of the contributions to your pension on favourable tax terms and will usually meet the scheme's administration costs for providing the pension. Your pension will normally increase during retirement and you may get a tax-free lump sum upon retirement. Many schemes permit you to retire early but on a lower pension. In addition your partner and dependants may be entitled to a pension when you die and some schemes may even contain an element of life insurance that pays out to them should you die in service.
Points To Watch: Most Occupational or Company schemes require you to be a member for a minimum 'vesting' period (usually 2 years) before you become eligible for benefits. These days people tend to change jobs more often so you should be aware that some schemes are not readily portable. Changing jobs, particularly in later years, may significantly affect your future pension. Many schemes allow you to top up your pension by making Additional Voluntary Contributions (AVCs).
There are two main types of Occupational or Company pension scheme:
A Final Salary Scheme where your employer promises you a level of pension in retirement that is usually related to the number of years you have been in the Occupational or Company scheme and the average of your last few years earnings.
A Money Purchase Scheme where the pension you will receive depends on the contributions made towards your retirement fund and the fund’s investment performance. Upon retirement, your fund is used to purchase an Annuity that provides you with a pension income. The level of pension is not related to your average earnings over the last few years.
Some companies may offer a Group Personal Pension which has the benefit of your company's buying power. Refer to the Personal Pension section for more details.
You can use a company scheme for 'contracting out' of the State Earnings Related Pension Scheme (SERPS).
General
Personal
Stakeholder
Occupational or Company
AVCs
Annunities
State Pension Scheme
