Company pension
In broad terms a company pension can be explained as a pension which is set by the company for placing the pension needs of their employees. There are two types of company pension. There is a funded pension company in which the pension contribution is automatically taken from the employee’s salary before tax and to which an employer may choose to match this contribution with their own. There is also a non-contributory company pension, in which the company makes a payment to a pension on behalf of the employee.
Final Salary Clarification
Final salary company pension offers employees a part of their salary at the time of retirement. This indicator is usually calculated as one sixtieth of the employee’s salary multiplied by the number of years they have worked in the organization. This company pensions often appeared in the press in recent years as many large firms are the UK were shut down this company pensions new employees, and in some cases, frozen pensions of existing employees. This occurred as the risk of this type of pension is with the employer, not employee.
Money Purchase Explained
With company pension purchase price, the actual payment of the sum at retirement is directly related to the amount of money the employee is paid, no matter how good investment and annuity rate. Unlike a final salary pension companies, the risk lies with the employee.
Final salary against the purchase price.
While the headlines keep drawing our attention to the fact that many companies refuse to pay the final retirement of the company to the purchase price, it would be dangerous to automatically assume that you are better off with a final salary scheme, rather than the purchase price. In fact, even if it is assumed that the shift away from final salary schemes is not in the interests of future employee, there are people who might be better for the other scheme in any case. This will depend on the circumstances of the person. For example, a person who changes his / her employer each year could be much better with the scheme of purchase money, as it could provide them with greater flexibility. It is always best to discuss your personal situation with an experienced and objective financial advisor to decide which company pension best suited for your conditions.
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