Other Benefits

Widow's pension and death-in-service benefits can be included in money-purchase schemes exactly as with final-earnings schemes.

On leaving the employment

Changing employers does not present quite such a problem over pension rights under a money-purchase scheme as with a final-earnings scheme. The following options are usually available.

1. Your rights under the scheme to date may be preserved for payment on retirement, the pensions policy (if one has been issued) being made paid-up.

2. If a pension policy has been issued it may be transferred from the old employer to the new, providing he is willing to continue it in its present form or in some modified form.

3. Should you join an employer who offers no pension plan at all, you may continue the pension policy in your own right, paying all the premiums yourself. But the Inland Revenue rules require that the premiums be actually paid in the first instance by the employer, who can recover the cost from you by deduction from salary.

Pertinent points of a pension plan

Here is a list of some of the questions you will need to ask about any pension plan that may be offered to you as a part of your terms of employment.

1. Who is qualified to join, and at what age?

2. Is it a benefit-related or a money-purchase plan?

3. From what age is the pension payable?

4. Is the plan funded in the sense that pensions are paid out of a fund that is outside the control of the employer?

5. If it is a benefit-related scheme, has the employer undertaken to finance the fund so that it shall always be sufficient to pay all projected benefits as they fall due for payment?

6. If benefit-related, what is the formula for determining the amount of your pension?

7. If the basis is final-earnings, how is this term defined?

8. Is there a pension for the widow of a member who dies after his retirement but before his wife? How is it calculated?

9. What life assurance benefits are payable should a member die before retirement?

10. What provision is there for any increase in pension when once in issue?

11. Is membership compulsory or optional?

12. Is it contributory or non-contributory?

13. Are there any commutation rights?

14. What options are available when members leave the service of the employer?

15. Will members be contracted out of the state earnings-related pension scheme, or will the company pension be in addition to the earnings-related state pension?

Money-purchase Schemes

A money-purchase pension scheme is a very different animal from a final-earnings scheme. By the money-purchase method a stated percentage of your earnings is paid into a pension fund each year, which builds up through reinvested interest and capital appreciation. On your retirement the share of the fund represented by contributions in your name is used to buy an annuity or pension for you.

In some cases these pension schemes are non-contributory (i.e.the cost is all borne by the employer), but in most cases contributions are made by both employee and employer. Such schemes are usually... see: Money-purchase Schemes

Refunds, Personal And Business Finance 2017

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