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Tuesday, November 10, 1998 Published at 14:56 GMT


Business: Your Money: Money Reports

How does your pension rate?

Different workers, different pension needs - is your pension flexible?

The long-running pension mis-selling saga has focused on the critical importance of getting pension arrangements right. In a three-part special report, BBC News Online's Ian Hamilton examines the options for people preparing their retirement.

Whatever pension scheme you have or are considering, the key issues about whether it is going to do the right thing by you are cost, flexibility and the level of final benefits.

How does yours rate? Here is a guide to what the better pension schemes offer their members:

Occupational schemes based on a 'final salary' formula:

  • Flexible retirement age of up to 65
  • Retirement pension linked to inflation
  • Pension worth two-thirds of your salary after 40 years of service
  • Pension based on full earnings including bonuses and overtime, not just basic pay
  • Ability to take a lump sum at retirement
  • Full retirement pension if disability forces you out of the workforce early
  • In case of death, benefits for dependents up to four times annual salary as tax-free lump sum or a pension for partner and dependants.

    Money purchase or defined contribution schemes:

  • Employer as well as employee contributions increasing with age.
  • A pension fund manager with a long-term record of good performance - with independent measures of performance
  • Administration charges at least partly paid by the employer
  • Life assurance and disability insurance paid for by the employer
  • Penalty-free transfer to a new employer's scheme
  • The option of early retirement without penalty

    Personal pensions:

  • The flexibility to vary or stop contributions altogether without penalty
  • A fund manager whose investment performance compares favourably with other funds
  • Administration charges at least in line with other providers'
  • Penalty-free early retirement

    For a guide to the different types of pensions outlined above, click here.



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