Pension Planning - Hybrid Occupational Pension Schemes

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Hybrid Occupational Pension Schemes

Hybrid schemes provide many benefits, which have been worked out on both a salary-related and a money purchase basis. For example, your pension might be worked out on both bases with you receiving the greater of the two.

When your pension is paid

Schemes normally have a retirement date at which the pension starts to be paid. You can choose to either start your pension at an earlier date or at a later one, but this will affect the amount received, i.e. if received earlier it will be reduced, and if you start your pension later it may be increased.

At present the Inland Revenue rules, allow you to start your pension at any age between 50 and 75. However, the government has floated the idea of raising these ages to 55 and 80. The change could take place gradually during the years 2010 to 2020.

Checking how much pension you will get

Although it is necessary that you know what type of occupational scheme you belong to and the nature of the pension you are being offered, you do not have to wade through a mass of complicated sums to find out how much pension you should expect. The scheme that you belong to must provide you with a 'benefit statement', which is automatically provided annually.

From 2002, the government plans that schemes should provide 'combined pension schemes' that will show your expected state pension along with the occupational pension that you may receive.

Occupational salary-related schemes from April 2001 onwards

Some pension professionals had been calling for the government to allow members of occupational salary-related schemes to be allowed simultaneously to pay into stakeholder pension schemes once they start in April 2001.

The government had generally ruled this out, but indicated that it might consider allowing it for people on low earnings. If simultaneous membership is allowed, it will be found to be a better way of topping up pensions than either AVC's or FSAVC's. This is because stakeholder schemes are likely to cost less and can be used to provide a tax-free lump sum.

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