|
THE GUIDANCE AND/OR ADVICE CONTAINED IN THIS WEBSITE IS SUBJECT TO THE UK REGULATORY REGIME AND IS THEREFORE PRIMARILY INTENDED FOR CONSUMERS RESIDENT IN THE U.K.
Finantium is an appointed representative of Financial Limited which is authorised and regulated by the Financial Services Authority |
Occupational pensions
Company pensions are set up by employers, for their staff. They can be “final salary” also known as “defined benefit” schemes. Money is paid in from the company, the members or both. The money is then invested.
Members get stated benefits, typically a proportion of the final salary for each year that they have worked for the company. Members can take their whole entitlement as a pension or members can opt to reduce their pension by taking some of the money as a cash lump sum on retirement.
If the pension scheme is not doing very w ell (e.g. its investments fall in value) then the COMPANY is expected to make up any shortfall. The investment risk is with the employer. This can make it very expensive for the company to fund, and many companies have now stopped these schemes for new entrants and in some cases for existing members as well.
A cheaper alternative is for the employer to set up a "defined contribution" or "money purchase" scheme. In this case the monthly contributions from the employer and employee are put into a fund earmarked for that particular employee who, when he or she retires, is able to take a tax free lump sum and, with the balance, buy a pension "annuity." With this type of scheme, the investment risk is with the employee.