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>> No. 6218 Anonymous
28th April 2016
Thursday 1:14 pm
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This is partly /job/, but as the issue is pertains to is financial I thought it right to post here.

I'm doing a year in industry next year, and have just got my contract through. It says I'll be eligible for the pension scheme. As I may only be working there for a year, the contribution won't be massive, but is it worth joining? Having only ever had zero-hour student jobs, I'm not particuarly versed in actually dealing with tax and pensions, etc; I'm wondering if I'm right in thinking if I put some money in now, it'll just sit there over the next 4-5 decades and build up a healthy chunk of interest. Am I right in thinking this? Is it worth it?

It's a huge company (one of the biggest in the world), but it's also an automotive company that may have received a healthy chunk of US government money to stop it going under, so I don't know if that should factor in my decision.

I've already taken the optional loan from SFinance (what's another 2k on top of 50?) and am going to be putting that into one of those time-locked savings accounts with a good interest rate.

tl;dr Is it worth taking part in a pension scheme if I may only be working there for a year?
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>> No. 6219 Anonymous
28th April 2016
Thursday 7:11 pm
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Do you know what the contribution rates are?
>> No. 6220 Anonymous
28th April 2016
Thursday 9:25 pm
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Contract hasn't arrived, but a bit of googling takes me to a website called "The Pensions Department" which looks a little bit dodgy. If the documents on the website are correct, this is what the rates are. I don't actually understand this table, mind.
>> No. 6221 Anonymous
28th April 2016
Thursday 10:12 pm
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Accrual rate means it should be a defined benefit scheme, e.g. if you are in it for one year then you'll get 1/60th of your salary as the pension, if you're in it for 20 years then you'd get 20/60th's of your final/average salary as the pension. If your salary during the placement year was, say, £20k then 1/60th would mean you get an annual pension of £333.33 and this would be revalued, probably in line with CPI, to your retirement.

The contributions are how much of your salary you'd have to pay for this, but that's usually a gross figure. For the 10% gross figure the net amount coming out of your salary would be 8%.

The tiers at the end looks like something to do with National Insurance but I don't know what it's on about.
>> No. 6222 Anonymous
28th April 2016
Thursday 11:22 pm
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So it doesn't gain compound interest, then? Basically I'm wondering if it's worth putting it in the pension or putting it in a (relatively) high interest bank account.
>> No. 6223 Anonymous
28th April 2016
Thursday 11:26 pm
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I'm being stupid here. Revaluing it is essentially gaining interest. The CPI right now, however, is 0.5%, and I could probably get better interest for the moment in a locked bank account. I can't predict the future, though.
>> No. 6224 Anonymous
29th April 2016
Friday 6:45 am
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If it's a final/average salary scheme then the benefits you can accrue in that year are likely to be far higher than what you'd get in a money purchase scheme - using the £333.33 example again, if you bought a level annuity at a 5% annuity rate, you'd need a pension pot of £6,666.66 in today's terms to provide you with the same level of starting income - as the income from the scheme would be inflation proofed you'd probably need to double that pension pot to purchase the equivalent inflation linked annuity income.

If you get the opportunity to join a defined benefits scheme then take it. They're generally the best private pension provision out there.

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