Is your company pension satisfactory

Company pension schemes are almost always better value than personal pensions. That is the clear message of the recent personal pensions mis-selling scandal. Given the opportunity, almost everyone should join an occupational scheme rather than take out a personal plan.

But how can you tell whether your company scheme is a good deal? Occupational pension schemes vary enormously. And some are more generous than others. Do not assume all employers are equally munificent - take a good look at your company pension scheme. And check out your new employer's scheme if you move jobs.

First, assess the type of scheme your employer offers. Broadly, pension plans fall into two categories. In a final salary scheme, your benefits depend on how long you are a member of the plan and your salary at retirement. In a money purchase scheme, your pension depends solely on the returns generated on the contributions made by you and your employer.

Final salary schemes are generally better than money purchase plans, since they guarantee a predictable level of pension. However, some people - particularly young, mobile workers - will find money purchase plans more suitable, even though they carry no guarantees.

Either way, see how much your employer will pay on your behalf. In a money purchase scheme this is simple - look at the percentage of your salary that the employer puts into your fund. About 8 per cent is average.

In a final salary scheme, it is more complicated. You need to study the formula by which your pension is calculated. The standard is one sixtieth of final pay in yearly pension for each year of membership, up to a maximum pension of 40/60ths. Anything less generous than this means your employer pays less than average.

Just as different employers make different contributions, so different companies require you to pay variable amounts. The ideal is a non- contributory pension scheme, where you do not have to pay anything. These are rare. In most schemes you can expect to have to contribute around 5 per cent of your salary each year. If you have to pay more than that, you are hard done by compared with most people. Some schemes give you the option - but do not compel you - to pay more.

Next, look at when your scheme allows you to retire. Pension schemes specify a normal retirement date - if you want to stop work at an earlier age, you will generally get a smaller pension. The Inland Revenue prevents schemes having normal retirement ages below 55 and most schemes have now equalised their retirement ages for men and women at 65. But some schemes have retirement ages as low as 60.

Remember to check what will happen to your pension in retirement. The effect of inflation will steadily erode the value of a fixed pension. The best schemes promise to increase your pension in line with earnings inflation each year. All schemes now offer limited price indexation, which means benefits increase annually with prices inflation, or by 5 per cent, whichever is less.

Finally, note that your pension scheme should offer protection for your dependants when you die. If you die before retirement, the best pension schemes will pay your dependants a lump sum of four times your annual salary before your death, plus, possibly, an ongoing pension. If you die in retirement, the best schemes pay a spouse's pension of two-thirds of your pension. Some schemes also pay pensions to other dependants.

FT 11th February 1998