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In broad terms a business pension serves as a a pension which can be established with a company to support the pension needs of its employees. There are two types of company pension. There is a contributory company pension, in which the pension contribution is automatically removed from the employee's salary, before tax also to that the employer can pick to fit this contribution using their own. Another highlight is the non-contributory company pension, in which the company contributes the payment towards the pension on the employee's behalf.

Final Salary Explained

fast release - The ultimate salary company pension scheme supplies the employees a proportion of the salary during the time of retirement. This figure is generally calculated as one sixtieth from the employee's salary multiplied from the number of years they have been employed inside the organisation. This business pension has frequently appeared inside the press recently as numerous larger UK firms have closed this business pension to new employees and in some cases have frozen the pension of existing employees. It has occurred as the likelihood of this sort of pension lies using the employer and never the employee.

Money Purchase Explained

fast release - With the money purchase company pension, the particular pay-out sum on retirement is directly as a result of how much money the worker has paid in, just how the investments perform and the annuity rate. Unlike the last salary company pension, the risk lies with the employee.

Final Salary v. Money Purchase.

Frozen Pension Release - Although the headlines keep drawing our awareness of the fact that many companies are leaving the ultimate salary company pension on the money purchase, it could be dangerous to automatically presume that you are better off using a final salary scheme instead of a money purchase. In reality, though it may be generally accepted that the get off final salary schemes is not in the best interest with the employee's future, you will find people who might be more satisfied under a different scheme anyway. It will depend on an individual's circumstances. For instance, a person who changes their employer every year could be far better served by a money purchase scheme as it might provide them with greater flexibility. It is usually best to discuss your individual situation with an experienced and unbiased financial adviser in order to determine which company pension is easily the most suitable for your circumstances.