Pension Planning - Occupational Pension Schemes

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Occupational Pension Schemes

Most employers run their own pension schemes, which are commonly known as Occupational pension Schemes. They are the most ideal way to save up for retirement due to the fact that they have further advantages than most other schemes.

• Some schemes are non-contributory which means that you don't have to pay anything at all and your employer meets the full cost of the scheme.
  
• Schemes ran by employers are usually a package deal, where additional benefits can be received, such as life insurance, pensions for your spouse and even an early pension should you need to retire early due to illness.
  
• The cost of such schemes may prove to be smaller than those you arrange yourself
  
  

The pensions schemes available through work may not be occupational schemes, but schemes ran by other organisations, such as insurance companies, banks and unit trusts. Until April 2001, the alternative schemes were known as group personal pension schemes (GPPS). These schemes also have many advantages over personal pension schemes that you arrange yourself.

Special features may be available with these schemes as employers may have negotiated special terms such as flexible contributions, with the pension provider. However, the extra advantages of the GPPS are lost once you leave your employer, though the personal pension continues.

Your employer should offer you either membership of an occupational scheme or GPPS, to which 3 percent of your pay should be contributed, or access to one or more stakeholder pension schemes. This only applies if your employer has more than five employees. If your employer offers you access to a stakeholder pension scheme it does not mean that your employer will pay into the scheme on your behalf. It is usually ideal to choose an occupational pension scheme, as it benefits favourable tax return and your employer puts money into the scheme on your behalf, and often pays the costs of administering the scheme rather than them being charged to the pension fund.

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