5 Pension questions you shouldn’t be afraid of asking your prospective employer
You’ve landed an interview, you’ve done your prep and have a few questions up your sleeve, but will you ask your prospective employer what kind of pension they provide?
When we previously surveyed UK job hunters, only a third said they bothered to ask a company about its pensions provision during the interview stage. A further third (37%) admitted they didn’t even ask upon joining.
Pension contributions are effectively extra pay so it’s important to know exactly what your new employer is offering. Asking about pension contributions at interview stage is as important as asking what the salary will be.
But what other things should you ask a prospective employer about their pension scheme?
Here are our five essential questions to ask:
Will I automatically be enrolled into the company’s workplace pension scheme?
Under new Auto Enrolment rules, if you’re between 22 and state pension age and earning £10,000 or more annually, your employer has to automatically enrol you into a workplace pension scheme. Bear in mind that if you do request to opt out, you may only be able to opt in again once every 12 months. Auto enrolment is a legal requirement but there have been many cases of employers failing to meet their auto enrolment duties http://www.nowpensions.com/blog/how-small-and-micro-employers-can-avoid-auto-enrolment-pitfalls/ so this is a good question to ask to gauge where the company is at regarding their auto enrolment responsibilities.
What is the level of employer and employee contributions to the pension scheme?
The government has set minimum contribution levels which will be rising from April 2018. However, many employers will offer a contribution above the minimum level (currently 1% for an employer and 0.8% for an employee), making them a more attractive prospect for job seekers.
It’s also worth asking if they offer a ‘matched contribution’. For example, if you paid in 5% of your salary each month, the company would match this and also pay in 5%, taking you to a total contribution of 10%. The recommended monthly contribution for a decent retirement pot is between 10% and 15%, but this will depend upon many factors including the age at which you first start pension saving.
Where will my money be invested?
The different financial products which make up a pension scheme’s investments carry different levels and types of risks. More risk means that there is greater potential for profit and a higher eventual retirement fund, but there is also a greater potential for loss. Financial products which carry less risk may be more secure and less likely to fall in value but this often comes with lower returns. It is worth asking if you get to choose a level of risk for your pension investment or whether they have just one set package that all employees are enrolled into.
What’s the fund performance like?
Many savers have watched their hard-earned pensions evaporate in recent volatile market conditions. That’s highlighted the need for companies to find investment managers who are able to produce stable returns over a long period of time, and in varying market conditions. Asking how the company’s current workplace pension scheme has been performing will give you a good indicator about whether they are working with a decent pensions scheme provider who is managing risk well in changing market conditions.
What are the charges on the fund?
Many people don’t realise that there are often extra hidden fees you have to pay to pension companies including an annual management charge and exit or transfer fees if you switch jobs and want to transfer your pension across. These fees can seriously erode the overall value of your retirement pot so ask up front what kind of charges are on the fund.
At NOW: Pensions we have a board of trustees whose sole purpose is to look after our members’ money and ensure that it is invested responsibly. We regularly assess member charges and aim to not create excessive fees and charges. Our dedicated investment team looks to manage risk by diversifying our investments and adapting these to changing economic climates.