Taking Out a Pension

Provided your earnings are more than the National Insurance lower earnings limit (£87 in tax year 2007-8) and where a company consists of at least 5 employees your employer is usually obliged to offer you the chance to join their company pension scheme. They must give you access to a stakeholder pension unless they can offer you either an occupational pension scheme or another alternative pension provision.

Stakeholder pensions must only consist of low minimum payments where you can make contributions from as little as £20. It must also provide the flexibility for you to pay in when it suits you and the amount the pension provider is able to charge you in annual management fees must be restricted and capped.

If your employer is obliged to offer you a stakeholder pension, it must enable you to make your contributions directly from your wages via the company’s payroll. Your employer is not compelled to contribute anything into the scheme themselves or to pay any administration charges imposed by your pension provider.

Group Personal Pensions

Your employer may also arrange for a pension provider to set up a personal pension arrangement through your place of employment. Personal pension schemes of this nature are referred to as ‘Group Personal Pensions’ (GPP). There can be several advantages of joining a GPP which has been arranged by your company.

Firstly, your employer will usually make contributions towards your pension and if they have offered it as an alternative to a stakeholder pension, then they have to contribute an amount equal to at least 3% of your basic salary. If your employer has made contributions and you subsequently leave the company, you do not lose any money from the contributions your employer has made. They will also deduct the money from your pay and send it on to the pension provider on your behalf.

As it is a group pension scheme, your employer may be in a position to negotiate more favourable terms than you would normally be able to obtain yourself as an individual, e.g. your employer can often negotiate a reduction in administrative costs. Usually, there is also more flexibility in that you can maintain contributions to your pension scheme if you change employers.

Complaints About Your Pension Scheme

If you have a personal pension scheme, the company which sold it to you should have procedures in place if you decide to make a complaint. You should follow these procedures in the first instance by getting in touch with the pension provider who sold you the plan.

Similarly, with company pension schemes – a formal complaints procedure is required by law. If you are still not satisfied with how your complaint is dealt with, you can take it up with the Pensions Advisory Service. Their network of voluntary pension professionals can help anybody with a dispute or complaint about their pension arrangement and the service is free.

If they believe you have a case, you will be referred on to the Pensions Ombudsman or the Financial Ombudsman Service who investigate cases where people have been mis-sold pension schemes. They would deal with complaints where a person feels the pension they were sold did not suit their circumstances or where a person wasn’t warned that the amount of money the pension would pay out is not guaranteed.

If your pension scheme administrators have broken the law or breached the regulations governing their conduct, you can ask for them to be investigated by the regulator. For company pension schemes, this is the Pensions Regulator and for personal pensions, it’s the Financial Services Authority (FSA).

Getting Compensation

The Pension Protection Fund (PPF) can take responsibility for your company pension if the company administering it becomes insolvent and it doesn’t have enough money to pay your pension. However, the scheme must not have begun winding up before 6 April 2005.

If your personal pension scheme is not being paid because a financial firm goes out of business and can’t pay the money it owes you, or if you have lost money because you have been wrongly advised by an authorised financial adviser, you might be able to get compensation from the Financial Services Compensation Scheme (FSCS).