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Would you join this particular employer pension scheme?

(5 Posts)
Loot Fri 07-Mar-14 00:06:57

My employer is offering the Social Housing Pension Scheme (SHPS) until auto-enrollment (on to a lower-contribution scheme) in May - but I'm hesitant about joining.

SHPS has a deficit of over £1bn, which has ballooned massively since the recession began. The commentary I'm reading isn't favourable, and ultimately, the liability to get out of this deficit can't not be passed on to scheme members. Some commentators are saying it will cost individual members around £1,600 a year. (That's a lot in the context of third sector salaries.)

The maximum my employer will pay in is 6% of my £25,000 salary (£1,500 per year). Unless I'm missing something, the maths just doesn't add up: I go with my employer's scheme, they pay £1,500 a year, I end up paying £1,600+ a year to help clear the scheme deficit?! And in my mind, helping to clear a deficit just doesn't sit with growing your money for retirement.

I'm good at saving (albeit relatively modestly, given my salary) and fully intend to provide for my retirement as best I can, but even though the general consensus is yes, definitely-always-absolutely sign up to an employer/employee contribution scheme, I'm just not convinced SHPS is worth joining.

I'm wondering about stocks and shares ISAs/SIPPs instead, and extending my house with some of my savings so I can have a lodger - and anything else anyone can think of!

Can someone more in the know than me please advise if my gut is right to tell me to avoid SHPS and go for something different to save for retirement?

Thanks a lot.

CogitoErgoSometimes Fri 07-Mar-14 08:15:08

I think you should talk to someone at SHPS. Deficits in pension funds can go up or down according to the success of the investments and I would be very surprised if they actually start billing members in the way you seem to be describing. If your employer is offering to pay in 6% of your salary you should take advantage of that, even if you don't make any personal contributions on top.

LesterBurnam Fri 07-Mar-14 22:44:38

Loot, I'm not sure where you read that scheme members are liable for any deficit in the SHPS as that is simply not possible under UK law. If you don't join the scheme you are missing out on the contributions your employer will make for you.

TalkinPeace Sat 08-Mar-14 20:20:47

as you are well aware I'm not the world's biggest fan of pension schemes
"pension scheme deficits" are one of the biggest bollocks numbers of the lot
its all about proportions rather than absolute numbers or even percentages

pensions are a ponzi scheme
schemes with a steady stream of new members
a wide range of profitable employers
and good trustees
are basically OK

the reporting rules are just bilge guesswork

mrsmalcolmreynolds Sun 09-Mar-14 14:03:13

Backing up what previous posters have said. Quite apart from anything else, if your employer is only paying in a set amount then you would be a defined contribution member. As such the issue of deficits is simply not relevant to you. If the suggestion from your reading is that in future all members (even DC) will have to pay towards deficits then that is massive (and in my view paranoid and unsubstantiated) speculation on possible future changes in the law. I am a pensions lawyer btw.

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