UK airlines and pensions.
 

I have a number of questions regarding those UK airlines that offer Defined Contribution pensions to their pilots.
1 -What pension arrangements do you have,eg pilot/company contribution
2-Which financial services company runs your pension
3-How many funds and what sort of risk do they offer,and what returns do you receive
4-If you were previously in a final salary pension how did your employer effect the transition and what advice were you given regarding your investment strategy
5-Do you use a financial advisor to manage your investment and is this paid for by your employer
6-How often should I check my investment and how much should I expect to pay to change it and how often cn I change it?

My airline is in the process of closing our final salary scheme and suddenly overnight I am meant to be a professional financial investor,as well as being a pilot!!This obviously has a major impact on my retirement years and as usual I feel my employer is going to do the minimum possible to assist me.

Hello Tubby
you hit the nail on head
you are not a financial advisor so make an appointment to see one

You would not let an F/A fly your plane so let them do the financial planning

If you don t have one already get one who is personally recommended

Good luck:ok:

Does anybody else have any constructive advice to give please?

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 :E
-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:ok:

When my previous emplyer went through this process our final salary scheme was frozen at the point of transition. I was given the option of starting a new scheme with an empty pot and leaving the accrued benefits in place with the old scheme (index linked to retirement) or converting the final salary benefit into a 'pot' of money to put into he new scheme. Just about eveyone elected to do the former as the benefit was guaranteed and therefore the company still has to pay up even if investment returns in the future are not been as good as they need to be to grow the pot.

It really depends on how long you've been in a final salary scheme. In my case it was 10 years which was far to good a benefit to give up and risk.

As Charlie A states your looking at roughly 5% return on investment in retirement. Again, very very roughly, to work out how big a pot you need sit down and work out what retirement expenditure you will need and convert that to an annual figure (not forgetting tax)multiply up based on 5% ROI and you will get a scarily large number which is your retirement pot requirement (in todays money). Add in inflation and voila, your final retirment target figure.

Unfortunately I am now in a crap defined contribution scheme and therefore supplimenting my pension contributions with other savings schemes to make up the shortfall, although things aren't as bad as I feared before looking at all the figures.

If I were your I'd run through the above process with a reputable IFA. Most work on no fee and, at the end of the day, you're not comitted to investing with them at all. However they will be able to go through the maths with you and the process will give you a good idea about where you stand which may not be too bad.

Good luck

Pay for impartial advice
 

I speak as someone who spent 30 years in Civil Service, then had to find a private sector employer. Here is my four pennyworth.

If you were to pay even £5000 for professional advice from someone who does not get commission it would likely work out better than being sold a product on the basis of how much commission the advisor gets.

Split your investments across at least two completely separate providers in case of catastrophe, and study carefully the rules on compensation for failure. Here is a link to a starting point. Compensation : FSA Money made clear ? about the FSA - on the assumption you are British.

The longer you have to go until retirement the greater the risk you can run, but even if you are in your twenties I would still suggest you should put some part of your investment into something really safe like Government Bonds. Look for funds with the lowest management fee, makes a huge difference over the decades. It may be worth putting as much as you can into an ISA, where the returns are tax free even after retirement. Compare with pension funds where you get your pension funds investment grossed up but you have to pay tax on your pension when you retire. Remember thanks to GB pension investments are not so favourably treated as they once were - some folk will word this more strongly!

Take a relaxed long term view over the value of your share portfolio but watch changes in charges made by your provider like a hawk. Some companies used to charge 0.25% pa on tracker funds and now charge 1% pa.

I am not a financial expert, don't take anything on trust from me, or any other single source.

I hope this helps.

^^^ just to emphasis what 911slf said. If you're paying more than 1% in fees then you're being hosed. I went through the same thing last year and managed to get my commissions down to 0.15% from around 2% in the company scheme. Was actually quite easy.

Thank you all for your replies.It would appear I have a lot of work to do .

I am retiring in a couple of months, so if you need some advice pm me. easyJet has had an average pension scheme, but I have done all right.:ok: