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Get the most out of your company pension scheme.

Byline: Colin Heseltine

THE recent Hutton report has recommended radical changes to public sector pensions to plug a funding gap.

For those in the private sector, however, years of pension underfunding has already come home to roost, with the near extinction of final salary pension schemes. If you are in the private sector then the switch from a final salary scheme has probably already happened!

So how does this affect you? With a final salary pension you are guaranteed benefits based on your total years of service.

But with alternative arrangements to final salary, you and your employer pay a fixed amount, (usually a percentage of your salary).

The retirement income you ultimately receive from these schemes is highly dependant on investment returns generated throughout the term of the pension. In essence a final salary scheme bears the risk of underperformance and underfunding, whereas with alternative schemes the individual member bears all of this risk.

ADVICE It is therefore imperative that members of nonfinal salary pension schemes pay extra care and attention to the underlying investment funds that the pension monies are put into.

Most modern schemes will have a wide selection of funds to suit your individual risk profile and desired investment returns, and with the help of an independent financial adviser you can be guided to the funds that suit you best based on risk and potential performance.

Unfortunately, when most schemes are set up, not enough due care and attention is given to the underlying funds, which results in employers and employees getting funds that do not meet their needs and do not meet performance expectations.

Heseltine As an employer, you need to make sure schemes are set up correctly, as the first place a disgruntled employee will turn to is yourself. As a member of the scheme you need to understand it, know how it is working for you and what it means to you in retirement.

At HRC Group we offer employers (and employees) a free, no-obligation assessment of their existing pension scheme arrangements with a view to adding value for all members.

There is a window of opportunity in 2011-12 when your pension scheme can be reviewed and potentially re-jigged without an additional cost to the employer.

So whether you are an employer/employee, call Colin Heseltine of HRC Group on 0191 488-8445 for an assessment of your current arrangements.


ADVICE Colin Heseltine
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Title Annotation:Features
Publication:The Journal (Newcastle, England)
Date:Mar 19, 2011
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