Will going part-time damage my pension?

Q: I have a final-salary pension with M&S, where I have worked for 32 years. I work 39 hours a week and have worked full-time since I was 18.

If I decide to reduce my hours, will my pension be based on my new working hours or will it take into account all of my service?

Philip Pearson is a partner at P&P Invest in Southampton

A: The definition of a final salary varies tremendously between different pension schemes. It would therefore make sense to review the handbook that you should have received from your pension provider when you initially joined the scheme to see how your provider defines 'final salary'.

If this doesn't clarify things, contact the personnel department. If there's a risk that your final salary pension will be reduced as a result of moving to part-time work, consider leaving the pension scheme before you reduce your hours to preserve the final salary benefit.

This will be revalued from the date of leaving until the normal retirement age by the level of either inflation as measured by the consumer prices index or 2.5% each year, whichever is lower, so providing a partial hedge against inflation.

If you decide to leave the scheme, you should consider alternative forms of saving over your remaining working life, either through a stakeholder pension or a stocks and shares ISA.

It's important to review the value of your pension benefits each year to highlight any shortfall between the income that you are likely to receive from the scheme and the pension you are expecting. This should prevent any future shocks and give you sufficient time to make up any shortfall.

More about