Final salary pension views
Discussion
Ok I'm young thirties and have 3 pensions currently one a final salary and the other two defined contribution.
Anyway current situation is switched back to paye and the final salary deal is 8% contribution for a 1/60th accrual rate or 6% contribution for a 1/80th accrual rate.
My old final salary was good old 3% contribution for 1/60th.
Now for my age I already have a fair pension built up in final salary plus defined contribution but still 35years min of working life could male a very comfortable retirement.
So should I go for this? It does provide life INS of 1 years salary to my wife if I die in service plus the obvious tax breaks I am a higher tax payer.
I do have many other investments and am quite well balanced on the portfolio but I always advise take the pension if you don't your taking a benefit cut.
Views please.
Anyway current situation is switched back to paye and the final salary deal is 8% contribution for a 1/60th accrual rate or 6% contribution for a 1/80th accrual rate.
My old final salary was good old 3% contribution for 1/60th.
Now for my age I already have a fair pension built up in final salary plus defined contribution but still 35years min of working life could male a very comfortable retirement.
So should I go for this? It does provide life INS of 1 years salary to my wife if I die in service plus the obvious tax breaks I am a higher tax payer.
I do have many other investments and am quite well balanced on the portfolio but I always advise take the pension if you don't your taking a benefit cut.
Views please.
Lucky you! Anybody wuld be mad not to take up a final salary scheme when compaired to money purchase. If it we me I'd go for the 1/60th route as long as there are no other differences (eg it is the best final salary over your last three years). These schemes are also brilliant if your unlucky enough to have to reitre on medical grounds - eg they can provide big benefits over monay purchase schemes.
If you think about it say you retire on £40K at todays rates and have 20 years in. Then on thr 80ths schem you get £10K per year but on the 60ths schem you get £13.33K - a big difference.
If you think about it say you retire on £40K at todays rates and have 20 years in. Then on thr 80ths schem you get £10K per year but on the 60ths schem you get £13.33K - a big difference.
clk55pete said:
Lucky you! Anybody wuld be mad not to take up a final salary scheme when compaired to money purchase. If it we me I'd go for the 1/60th route as long as there are no other differences (eg it is the best final salary over your last three years). These schemes are also brilliant if your unlucky enough to have to reitre on medical grounds - eg they can provide big benefits over monay purchase schemes.
If you think about it say you retire on £40K at todays rates and have 20 years in. Then on thr 80ths schem you get £10K per year but on the 60ths schem you get £13.33K - a big difference.
+1 8% for a 60ths DB scheme is peanuts. Always go for the best accrual rate you can. You lucky lucky get.If you think about it say you retire on £40K at todays rates and have 20 years in. Then on thr 80ths schem you get £10K per year but on the 60ths schem you get £13.33K - a big difference.
I'm in my early 30's and on final salary, thing is is anything guaranteed financially these days? My father says take another private pension out, whereas I'm still thinking buy another house in a student town to rent, the sums for that work out 20 years rental its paid off with the deposit I have and I have a house that furnished for students would bring in £1200 a month for (ever) after?? Surely better than a pension, £1200 a month of a £200K pay out in todays prices?
Have to thank the old man really je forced me to take a pension on the day I turned 18 so was always used to 3% or 5% out of my salary it adds up pretty quickly and if I die before I can draw on it the wife gets a payout and pension or I can give it to any kids I may have.
I'm pretty confident I'll go for the 8% just a ball ache after only 3% for the same.
Thinking about it 8% gross really means 4.8% net which isn't bad at all
The wife is on teachers pension again from 22years old that's final salary too but split as after 2007 scheme changed to be average final salary for her didn't mean too much difference luckily.
I'm pretty confident I'll go for the 8% just a ball ache after only 3% for the same.
Thinking about it 8% gross really means 4.8% net which isn't bad at all
The wife is on teachers pension again from 22years old that's final salary too but split as after 2007 scheme changed to be average final salary for her didn't mean too much difference luckily.
Herman Toothrot said:
I'm in my early 30's and on final salary, thing is is anything guaranteed financially these days? My father says take another private pension out, whereas I'm still thinking buy another house in a student town to rent, the sums for that work out 20 years rental its paid off with the deposit I have and I have a house that furnished for students would bring in £1200 a month for (ever) after?? Surely better than a pension, £1200 a month of a £200K pay out in todays prices?
am already well into this game have 6 properties bought over the last decade all with very healthy ltv's even back in nov08.. Luckily all houses with all off road parking basically the only type I would buy or want to live in myself or actually did live in for a while in each. Anyway 8% decided wife doesn't understand it either but she is hugely for pensions.
One thing though how secure are final salary they may be final salary today but between now & drawing pension they might change the scheme even for those who have left. Still it's the best you can do & it's a benefit so not taking it is decision to take less than your role is rewarded.
Well all the forms just handed into HR - and its a one time chance i.e. I couldnt change to the 6% in the future now or vice versa only stop.
Annoying thing is I have got quite used to £300-350 odd net income over the last 6 months (rules were you cannot join the scheme until you have been a perm for 6 full months).
Annoying thing is I have got quite used to £300-350 odd net income over the last 6 months (rules were you cannot join the scheme until you have been a perm for 6 full months).
euroboy said:
Do it! Im on 1/30ths with a 6% contribution - its a huge relief to know that there is at least some money in the pot come retirement time.
good thing is with my previous pensions even now every household running cost is easily covered plus the food shopping so state pension on top will be a nice little extra and them anything extra between now & when I retire will be for cars holidays and having fun & no doubt "helping out" with weddings and university .... In very round numbers the actual cost of buying pension is in order of,
1/80th needs about 12% of earnings paid in as contributions.
1/60th needs about 16% of earnings paid in as contributions.
1/45th needs about 25% of earnings paid in as contributions.
1/30th needs about 33% of earnings paid in as contributions.
The contributions will typically be shared between employee and employer in an agreed way.
So looking at 1/60ths, if you're putting in 8% it's costing your employer about the same. This discussion relates to "final salary" pensions but if you're on a money purchase scheme or buying a personal pension the numbers work exactly the same. Although the stated figures are very approximate they do indicate the high cost of investing for a decent pension.
For those who aren't familiar - 1/60th means you'll need to work 40 years to earn a pension equal to 2/3rds of what you were earning at the time you retired, typically at age 65. i.e. 40 x 1/60 = 40/60 = 2/3
1/80th needs about 12% of earnings paid in as contributions.
1/60th needs about 16% of earnings paid in as contributions.
1/45th needs about 25% of earnings paid in as contributions.
1/30th needs about 33% of earnings paid in as contributions.
The contributions will typically be shared between employee and employer in an agreed way.
So looking at 1/60ths, if you're putting in 8% it's costing your employer about the same. This discussion relates to "final salary" pensions but if you're on a money purchase scheme or buying a personal pension the numbers work exactly the same. Although the stated figures are very approximate they do indicate the high cost of investing for a decent pension.
For those who aren't familiar - 1/60th means you'll need to work 40 years to earn a pension equal to 2/3rds of what you were earning at the time you retired, typically at age 65. i.e. 40 x 1/60 = 40/60 = 2/3
FYI - about 5 years ago when I was in the 3% 1/60th scheme due to the performance of the pension fund the company which had traditionally put in c15% had to increase it to just over 30% for the following 5 years - it negotiated this rather than one big slug out of the P&L in a one year hit...
Very good point about having the option in the future with switching out.
I guess as I now have 2 final salary schemes/pots it would certainly be prudent to keep one as a normal pension and nearer the time investigate a SIPP.
8% & 40% tax payer - its not really possible to say its easily affordable as your lifestyle & other living costs can be significantly higher than a 20%. But anyway everyone should do it.
I wonder what will happen in 2011 when there is std pension for all and the only way to not pay is to opt out - clearly it will mean no pay rise during that year for those companies who do not currently offer pensions but that said now could be a very good time to get it started.
Very good point about having the option in the future with switching out.
I guess as I now have 2 final salary schemes/pots it would certainly be prudent to keep one as a normal pension and nearer the time investigate a SIPP.
8% & 40% tax payer - its not really possible to say its easily affordable as your lifestyle & other living costs can be significantly higher than a 20%. But anyway everyone should do it.
I wonder what will happen in 2011 when there is std pension for all and the only way to not pay is to opt out - clearly it will mean no pay rise during that year for those companies who do not currently offer pensions but that said now could be a very good time to get it started.
musclecarmad said:
ozzie id have though you'd need to pay in more than 16% per year to get a final salary 60ths scheme - i'd have thought a hell of a lot more
I'd agree with that.My 60ths scheme is currently being funded by a total contribution of 26%.
At the last actuarial valuation the scheme was fully funded too, so this isn't inflated to cover a deficit either.
5pen said:
musclecarmad said:
ozzie id have though you'd need to pay in more than 16% per year to get a final salary 60ths scheme - i'd have thought a hell of a lot more
I'd agree with that.My 60ths scheme is currently being funded by a total contribution of 26%.
At the last actuarial valuation the scheme was fully funded too, so this isn't inflated to cover a deficit either.
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