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What are the key decisions that I need to make and what key information should I know before starting a Pension in the UK?

I am 24 and living in the UK. I want, well more like should, start a pension relatively soon. However I keep getting told it's an important decision and there are scare stories regarding people's pension funds which I don't entirely understand but has concerned me anyway.

So I wondered where I could find out what are the key areas I should know about before deciding which type, and which provide, to go with? One question I wondered about was how to actually pay per month, can you get it to come out of your paycheck automatically as a %?

Thank You

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In the US, pensions are a company specific solution. Not all companies have them and if they do, they'll have one pension choice only. Is that different in the UK? – Alex B♦ Aug 4 '11 at 15:58
What kind of company do you work for, a big or a small one? The rules are in the process of changing, but the bigger the firm the more options you'll likely have, and the more likely that your employer will have to contribute too – Gagravarr Aug 12 '11 at 10:08

1 Answer

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Pensions in the UK are a real free-for-all. A few years ago, the government introduced stakeholder pensions to try and simplify things, but if anything it's just made things more complex.

To give you an idea, everyone has access to a Basic state retirement pension, but there's also SERPS (state earnings related pension scheme) and the State second pension provided by the government. Then in the private sector there are the aforementioned Stakeholder pensions, Self Invested Personal Pensions, Final salary occupational pension schemes and Money purchase occupational pension schemes.

For a good summary, take a look at this excellent Times article and for more details, have a look at the Pensions in the United Kingdom Wikipedia page or browse around the Which? retirement section or the moneysavingsexpert pensions pages.

The main things to look out for are whether your company offers a defined benefits scheme, or a money purchase scheme where they offer pay additional contributions or offer to match your additional contributions. Either of these are likely to be better than just buying a money purchase scheme pension privately.

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+1 for the MoneySavingExport link - the introduction alone is worth a read: moneysavingexpert.com/savings/discount-pensions – Andrew Sep 14 '11 at 13:59

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