Types of Company Pension Plan
Although these vary from company to company there are two general types of company pension:
Salary Related Pension Scheme
This is based on the amount of wage you receive and the number of years you have been in the scheme.
Money Purchase Scheme
This is based on how much has been paid into the scheme and how well the money in the scheme has been invested. On retirement the fund is used to buy an annuity which is a regular income for life.
Company Pension Schemes can be funded or non-funded. Non-funded simply means that you don’t pay into the scheme, the company pays your pension contributions for you. The company do achieve tax relief on these payments, and they often use these schemes as a way of attracting employees to their company.
Access to Company Schemes
Since October 2001, it has been compulsory for certain employers to offer eligible employees access to a stakeholder pension scheme.
Access requires the employer to consult with its employees on the choice of a suitable stakeholder scheme provider and then notify all eligible employees of its final selection.
The employer does not have to contribute to the scheme but it has to provide a facility whereby the employee’s contributions will be deducted from pay and passed over to the scheme. If the employee does not want to take advantage of this facility, they should be able to pay by direct debit.
For advice on company pensions or pensions in general call 0800 043 6701