How do work pensions work?

I haven't talked to HR about it but how do pensions typically work?

I heard that if I stay with my employer for 25 years or longer I'll receive a pension.

How does that work? I started working there when I was 22.

Does that mean I'll start receiving a work pension at age 47?

How do pensions

I haven't talked to HR about it but how do pensions typically work?

I heard that if I stay with my employer for 25 years or longer I'll receive a pension.

How does that work? I started working there when I was 22.

Does that mean I'll start receiving a work pension at age 47?

How do pensions usually work?

Other answer:

Nicholas:
I haven't talked to HR about it but how do pensions typically work? – a company pension is a pension, whereby YOU contribute each month AND your employer contributes a percentage each month – now this can be a 3% contribution or more. so its better than a private pension, in that there is your company paying into it as well. So if you get a chance for a company pension, then you must go for it

I heard that if I stay with my employer for 25 years or longer I'll receive a pension – you will get some sort of pension regardless of how long you worked there. Obviously the longer you worked there and the more you paid in, the more you will get.

How does that work? I started working there when I was 22 – you can't claim a pension until 55 in some cases, in others its 60… but most start claiming at normal retirement age, which for me is 67.

Does that mean I'll start receiving a work pension at age 47? – not it does. You MIGHT be able to start claiming at 55, but that means you have at least 10 years of contribution beyond that which you won't have made. So a pension at 55 will be much smaller claimed at 65 say.

But whatever, the state pension on its own, would mean a very meagre existance, so you must supplement your income with some other company / private pension.

Clive:
In which country? This is a British answer.

There are two kinds, defined contribution and defined benefit. Defined benefit schemes are pretty much dead because they're expensive – what they do is, at retirement age, give you a pension that is a set fraction of what your last annual salary was, often 1/2. The trouble is that if where the pension scheme invests the money doesn't do so well, it's committed to paying you that even if it can't afford it, so you're unlikely to come across that kind of scheme these days unless you work for a government body.

So more likely it will be a defined contribution scheme. You contribute a percentage of your pay, that's taken off before calculating income tax so you can afford to put a bit more in courtesy of the government, and your employer contributes too – quite often they match what you put in or even put in slightly more. So deciding whether to join is a no-brainer to me – why turn down free money? This all goes into a pension "pot", that is invested, and when you reach the retirement age specified in the scheme, you'll get a pension of whatever your pot of money can buy.

That's basically it. No, you won't get it at 47, you'll get it at whatever is the retirement age in the scheme rules.

Re Vera:
Depends on what country this is and where you work.
For the US: very few employers offer traditional pensions anymore. Almost all have switched to the 401(k). For those, you contribute you own money every paycheck until you retire. You get some benefit from being able to contribute pre-tax dollars, and most companies have a matching contribution where they'll pitch in some money if you do.

Traditional pensions, if you even have one, depend a little on the company's plan documents, but generally you get "credit" for the amount of time you work for a company, and the longer you've been there the greater your pension will be, as a percentage of your salary when you retire.

Ask your HR people about THEIR retirement options because it will depend entirely on what they offer.

Judy:
Work pensions have mostly been replaced by 401Ks but some companies and unions still have them. But no you wouldn't get a pension at age 47, you'd be guaranteed it at a later age, probably 65. You might be able to take out a cash distribution earlier in place of getting the pension later, but would pay a tax penalty if you take it before you'e 59-1/2.
Bob:
Very few companies still offer pensions, most not offer 401K plans. However, if you are one of the lucky few, the pension plan will state when a person is eligible to start drawing a pension (usually that is a combination of years of service and age). It is not likely that you would be eligible to draw a pension at 47 (typically 55 and over)
shipwreck:
There are two kinds of pensions fixed contribution and fixed benefit. With fixed contribution the company puts in a fixed amount for you and you get a pension based on how investments did. Fixed benefit they promise a benefit and put in enough to cover the amount needed. You won't get anything until you retire after age 47 so say you retire at 57 with 35 years in you would get more than if you retired at 47.
Some companies don't fund enough to pay what they promised, they under fund and sometimes go out of business so only count on it a little not instead of saving for retirement yourself.
Some are pretty large amounts but many are tiny amounts like $500 a month or $1,500 which is better than nothing. Some decide not to have one anymore so they just cancel and go with something like a 401K or just not have a pension.
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