Wednesday, March 24, 2010
Open Question: Finally Salary Pension caped at 2.5% per year of salary or Money Purchase scheme?
Hello there hope you can help. I am currently in a final salary pension scheme 22 years service with a salary of approx £19K / year and 45 years old with 15 yearsâ service remaining. However it is likely that I will have to change job within the company with a reduced salary possible £17K. At this time I will have the option to stay in the final salary pension scheme or opt for their money purchase scheme. The finally salary scheme is caped to 2.5% of any growth in salary / per. I.e. the most the company would contribute is 2.5% even if your salary goes up 3% for example and the retirement age is 60. If I continue with my final salary scheme with the reduced salary, it would take me some time before my salary goes up to £19K although the number of yearâs service would increase. If I opt for the money purchase scheme I could freeze my current pension of 22 years and opt to pay into the money purchase scheme. I understand the company would contribute 15%. I know this is a complicated area but am trying to get some guidance on whether it would be better to stay in the finally salary scheme (capped at 2.5% growth per year) with a reduced salary or opt for the money purchase scheme although I understand the risk to the growth would fall onto me. Any feedback would be great
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