Hi Tubby
1.you agree an amount of salary to contribute into " the pot " eg 3-15% and the employer will put in about 5-15% every month.
2."the pot" is then managed and invested on your behalf by an investement bank/institution using low risk strategy. eg investing in about 10-20 funds but basically following the all shares average
3.some companies pay the fees but some companies dont.typical fees are 1% of total fund value per annum
4.accumulate HUGE pot (max @£1.75m!) and purchase annuity to pay pension
VERY VERY roughly each £100k of pot = VERY VERY roughly £5000 pa pension.
This is hugely variable depending on type of pension,annuity rates, Gordons special tax clawback schemes etc etc
However 25% of "the pot" can be taken as a tax free lump sum leaving 75% of pot to buy an annuity (GOOD idea)
+ves
money safe if company folds and is frozen and transferable
can contribute up to 100% of salary towards pension(at the mo)
You can choose to take investment strategy into your own hands if you feel brave
Companies have to appoint employee pension trustees and co trustees who will work in your best interests
fairly tax effiecent way of hiding money from ex wives
-ves
investments may fall as well as rise
totally at mercy of ftse market/wild punt into going long on Hang Seng risky etc
annuity rates falling as we live longer so expected pension under constant downward pressure
not a patch on final salary scheme imho
Hope this helps a bit.
Lots and lots and lots more to it obviously but the above is given as a broad brush overview
Good luck
overall not totally crap to have a money purchase pension
