YOUR PENSION CHOICES.

There are four key pensions to put under the microscope if you want to fully understand your options: Final salary company schemes, money-purchase company schemes, personal pensions and stakeholder pensions.



* Final salary company schemes have always been called the ‘gold standard’ of the industry, but they are becoming worryingly scarce. As the name suggests the amount you collect on retirement depends on how much you are earning in your last few years of work. This means your living standards are less likely to fall dramatically, through the big payments only go to those who have been with the same company for most of their careers. If you do have access to a final salary scheme you should almost certainly join it. Even if you leave the firm after a few years your benefits can be left until you claim them on retirement.

* Money purchase company schemes are the more common alternatives to final salary deals. With these the amount you get on retirement is based largely on the amount of money that gets paid into your fund and the investment growth it enjoys. This may not feel as good as the final salary arrangement, and you do need to keep more of an eye on your fund in case you need to top it up to get the pension you require. But as your company is likely to be funding the scheme costs and paying in some contributions on your behalf you should almost certainly sign up if this is the only option you have.

* Personal pensions. Huge numbers of insurance and investment companies, banks and building societies offer these – and with so much choice it’s worth getting expert help. Go to www.unbiased.co.uk for details of a local independent financial adviser who can give a free, no obligation consultation about the best plans. What you want is a personal pension that has low charges, high performance and flexible terms. It’s a tall order, but you can find it.

* Stakeholder pensions. These are variations on the personal theme. They are no-frills pensions which can be taken out if you aren’t earning – that’s why they are popular with full-time parents. The Government has put a cap on the charges that providers can levy, which should make your money grow faster. But you will get less fund choice than with a traditional personal pension which can hold your money back.