Final Salary changing to Average & also Second State pension
Discussion
Just had the formal notification that my current Final salary scheme is going to be changing (following agreement with unions etc - frankly its a forgone conclusion).
Anyway as is I pay in 8% and get 1/60th back + death in service benefits of 3x as a lump sum.
Proposal is that earnt Final Salary up to Ap2011 will be frozen and to increase inline with RPI (accept that)
From that point onwards they are changing to career average - which I totally understand.
The options for employee is 4% for 1/100, 6% for 1/80 or 8% for 1/67th.
In addition it mentiones that we will now also be able to opt into the second state pension ? What is this - what are the costs what are the returns. Is it worth it?
Anyway as is I pay in 8% and get 1/60th back + death in service benefits of 3x as a lump sum.
Proposal is that earnt Final Salary up to Ap2011 will be frozen and to increase inline with RPI (accept that)
From that point onwards they are changing to career average - which I totally understand.
The options for employee is 4% for 1/100, 6% for 1/80 or 8% for 1/67th.
In addition it mentiones that we will now also be able to opt into the second state pension ? What is this - what are the costs what are the returns. Is it worth it?
Please correct me if Im wrong here - but that article was suggesting that the Flat rate would result in a £73p.a. increase in state pension multiplied by years paying into it.
i.e. 10 years could provide £730 p.a. pension upon retirement
Next is how much does it cost p.a. - Higher rate Tax payer so if you can highlight the additional % cost it would be to myself.
From the scenario I posted it looks like I will be worse off than previously 1/60 v 1/67 for 8% and would need to invest in the Second state pension to "in effect" make the total annual accrual to be 1/60th.
i.e. 10 years could provide £730 p.a. pension upon retirement
Next is how much does it cost p.a. - Higher rate Tax payer so if you can highlight the additional % cost it would be to myself.
From the scenario I posted it looks like I will be worse off than previously 1/60 v 1/67 for 8% and would need to invest in the Second state pension to "in effect" make the total annual accrual to be 1/60th.
Welshbeef said:
Please correct me if Im wrong here - but that article was suggesting that the Flat rate would result in a £73p.a. increase in state pension multiplied by years paying into it.
i.e. 10 years could provide £730 p.a. pension upon retirement
Next is how much does it cost p.a. - Higher rate Tax payer so if you can highlight the additional % cost it would be to myself.
From the scenario I posted it looks like I will be worse off than previously 1/60 v 1/67 for 8% and would need to invest in the Second state pension to "in effect" make the total annual accrual to be 1/60th.
I'm not the best person to advise, I'm relying on my Stakeholder pension and anything I earn from the govt is a bonus. After all by the time I get there it may be paid over 70 years old!i.e. 10 years could provide £730 p.a. pension upon retirement
Next is how much does it cost p.a. - Higher rate Tax payer so if you can highlight the additional % cost it would be to myself.
From the scenario I posted it looks like I will be worse off than previously 1/60 v 1/67 for 8% and would need to invest in the Second state pension to "in effect" make the total annual accrual to be 1/60th.
I'd suggest you get some proper advice, however I'd not assume that the changes are going to be like for like. You could of course invest any money in either an ISA or a Stakeholder pension yourself.
I read throgh a local Gov't one not than long ago and was surprised that the "Career Average" was RPI'd to account for inflation.
Thus if someone remained in a job only receiving an inflationary payrise every year they would still in effect be receiving a pension based on their final Salary.
Thus if someone remained in a job only receiving an inflationary payrise every year they would still in effect be receiving a pension based on their final Salary.
AndyAudi said:
I read throgh a local Gov't one not than long ago and was surprised that the "Career Average" was RPI'd to account for inflation.
Thus if someone remained in a job only receiving an inflationary payrise every year they would still in effect be receiving a pension based on their final Salary.
Thats not what most people mean when they say final salary is it - Say I started a job at 18 paying £10k and by the age of 65 I was earning £250k (but only up until the last year had I received a payrise above inflation) in these scenarios - or any where there is promotion within your career the career average is not as favourable to the employee as a traditional Final Salary pension.Thus if someone remained in a job only receiving an inflationary payrise every year they would still in effect be receiving a pension based on their final Salary.
Ignoring the affordability of them as Im strictly looking at it from MY perspective.
Still RPI on career average is something which you couldnt complain about at all.
Welshbeef said:
AndyAudi said:
I read throgh a local Gov't one not than long ago and was surprised that the "Career Average" was RPI'd to account for inflation.
Thus if someone remained in a job only receiving an inflationary payrise every year they would still in effect be receiving a pension based on their final Salary.
Thats not what most people mean when they say final salary is it - Say I started a job at 18 paying £10k and by the age of 65 I was earning £250k (but only up until the last year had I received a payrise above inflation) in these scenarios - or any where there is promotion within your career the career average is not as favourable to the employee as a traditional Final Salary pension.Thus if someone remained in a job only receiving an inflationary payrise every year they would still in effect be receiving a pension based on their final Salary.
Ignoring the affordability of them as Im strictly looking at it from MY perspective.
Still RPI on career average is something which you couldnt complain about at all.
If you're middle aged, career peaked and just waiting out your 30years service before you retire, it's unlikely this switch to acruing your benefits on an average salary basis will have a significant difference as you would be unlikely to receive above infalationary increases in your twighlight years anyway. (For you I'm guessing the Career average will start from now until the end of your career and disregard any previous low earings)
AndyAudi said:
Welshbeef said:
AndyAudi said:
I read throgh a local Gov't one not than long ago and was surprised that the "Career Average" was RPI'd to account for inflation.
Thus if someone remained in a job only receiving an inflationary payrise every year they would still in effect be receiving a pension based on their final Salary.
Thats not what most people mean when they say final salary is it - Say I started a job at 18 paying £10k and by the age of 65 I was earning £250k (but only up until the last year had I received a payrise above inflation) in these scenarios - or any where there is promotion within your career the career average is not as favourable to the employee as a traditional Final Salary pension.Thus if someone remained in a job only receiving an inflationary payrise every year they would still in effect be receiving a pension based on their final Salary.
Ignoring the affordability of them as Im strictly looking at it from MY perspective.
Still RPI on career average is something which you couldnt complain about at all.
If you're middle aged, career peaked and just waiting out your 30years service before you retire, it's unlikely this switch to acruing your benefits on an average salary basis will have a significant difference as you would be unlikely to receive above infalationary increases in your twighlight years anyway. (For you I'm guessing the Career average will start from now until the end of your career and disregard any previous low earings)
For me Ive only been in this scheme a few years and luckily had a notable rise in that period - covered by the old scheme so thats banked. From Apr 2011 then if that happened again I would lose out x number of years
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