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Pension Pots

Old 28th Jul 2014, 20:55
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Question Pension Pots

Hi all. Before I start, I would like to say that if the following post is in the wrong section then please do let me know but I thought that Pensions should be under the jobs section.

I am curently studying to become a pilot but there is something ive never understood. On sites like pilotjobsnetwork on most of the airlines it says something like 7% basic salary paid to pension pot. Is this amount that the company pays paid into a company pot or could you put the amount or some of it into a cash ISA to avoid tax, especially with the limit being raised to 15k a year. Ive heard that airlines like CX pay the money directly to the pilot but wondered if its the same for airlines in the UK like Easyjet or Monarch.

I would appreciate any and all comments

Many thanks in advance
paistepst5 is offline  
Old 29th Jul 2014, 10:44
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In the UK, pension contributions are paid into a pension pot that can not be accessed until age 55 (I think it's 55 but you can check this online quite easily) The 7% you mention will be the companies side of the deal. You would be expected to add a minimum (in our company 3%) but there is actually no limit on the amount you could put in. Although there is a point (around 40k) where tax starts to apply.

The key to a decent pension is to load up early in your career as the compound effects are huge. Most people don't and can't understand why they're going to live in poverty past 60.

if you can manage 25% including company contribution from your 20s you can conceivable retire on full pay!!
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Old 29th Jul 2014, 12:17
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There are two types of pensions, final salary and defined contribution. I stand to be corrected but since BA closed its final salary scheme to new joiners many moons ego there are no longer any of these around in the UK. Final salary schemes quite simply paid a fixed percentage of your final years salary till you popped your clogs. Some schemes also had rules covering situations where your spouse/children outlived you and hence paid them a pension till their death.

So the other type are defined contribution schemes. The 7% you refer to is paid to a pension fund manager who in turn invest it into shares, government stock and many other types of (usually) lower risk financial instruments. There will be rules about how much you can pay in on top of the companies contribution and also each country will have its own rules and regulations covering situations such as you changing employer, emigrating and who gets what should you die in service before you get to cash in your pension pot.

The bottom line is that the only guarantee with a defined contribution scheme is that the fund manager will get paid. Even if this means taking their fees out of all the capital built up in the fund should the fund be in a deficit situation. The "bank" always wins. The end result is that after a career of both a company and yourself paying into a scheme it could be worthless.
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Old 29th Jul 2014, 14:21
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As could every investment one could make....there are two answers, spread the risk over several investments and asset classes or buy a shack on a beach in Goa and Fish every day.
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Old 30th Jul 2014, 00:48
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I started my first pension when I was 32 as I spent all my money previous to that on flying lessons. I couldn't contribute much for the first few years as I was earning circa 20k PA as a TP F.O.

In my mid 30s I realised the problem I am facing and have spent the last 10 years trying to catch up. Currently I contribute 25% of my salary (circa 65k PA) and my employer contributes 9%.

I'm hoping to have a pension of about 40k PA in today's money when I retire. That will have to support myself and my partner who has been child rearing for the last 10 years and had low paid jobs before that.

My advice; don't do it this way.
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