DB Pension Question

[rugbyleague]

Hoping you can help?

I've tried my Pension provider, but am waiting for a response.

I have a DB pension with my private employer which recently has had the employee contributions reduced because the pot has too much money in it for its 6000 members.

My salary has a number of elements (monthly pay, car allowance, shift allowance and bonus). When I get my pension annual statement it is always based on salary only, however my bonus and shift allowance is fairly significant and all contributes to my pension.

My worry is my contributions are around 50% more than my scheme is estimating on the annual statements and I'm now wondering how the extra contributions are going to be managed in my DB pension?

I am 56 so need to be retirement planning and I'm unsure what to do.

[Boringvolvodriver]

rugbyleague said:

Hoping you can help?

I've tried my Pension provider, but am waiting for a response.

I have a DB pension with my private employer which recently has had the employee contributions reduced because the pot has too much money in it for its 6000 members.

My salary has a number of elements (monthly pay, car allowance, shift allowance and bonus). When I get my pension annual statement it is always based on salary only, however my bonus and shift allowance is fairly significant and all contributes to my pension.

My worry is my contributions are around 50% more than my scheme is estimating on the annual statements and I'm now wondering how the extra contributions are going to be managed in my DB pension?

I am 56 so need to be retirement planning and I'm unsure what to do.

I suspect it will all depend on the scheme rules and without knowing what they are, it is almost impossible for anyone to comment.

IIRC my old DB Final Salary scheme, admittedly at the point I left non contribution on my part, included an average of the last 3 years bonus payments in the calculation of the final salary.

[craig1912]

Your “extra” may be going into AVC’s but as said without anymore info nobody can say.

You probably need to read the rules and find definitions for pensionable salary and contributions.

[Rufus Stone]

DB schemes are usually based on 'pensionable earnings' or a similar term. Both benefits and contributions are linked to this. Check the members handbook for the definition.

[rugbyleague]

Thanks everybody off to check my handbook!

[Countdown]

rugbyleague said:

Hoping you can help?

I've tried my Pension provider, but am waiting for a response.

I have a DB pension with my private employer which recently has had the employee contributions reduced because the pot has too much money in it for its 6000 members.

My salary has a number of elements (monthly pay, car allowance, shift allowance and bonus). When I get my pension annual statement it is always based on salary only, however my bonus and shift allowance is fairly significant and all contributes to my pension.

My worry is my contributions are around 50% more than my scheme is estimating on the annual statements and I'm now wondering how the extra contributions are going to be managed in my DB pension?

I am 56 so need to be retirement planning and I'm unsure what to do.

Do you know for definite which pay elements are pensionable? IME car allowance won't be and in a lot of schemes temporary or ad hoc allowances aren't pensionable either.

As your pension is DB do you know if it's based on Final salary, CARE, or some other basis?

The annual statements will be based on the information that your HR/Payroll team provide to the Fund administrators. It might be worthwhile asking them which elements of your salary your pension is going to be based on.

[rugbyleague]

Thanks everyone for this, i've found the scheme booklet on line and found a few interesting things.......

My pension contributions/calculations do include bonus and shift premium, not surprisingly they don't include car allowance.

I also found out I can retire with no reduction applied to pension at 62 which I was unaware of.

I also learned that I get an Individual Pension Percentage amount for each year contributed and these are used to calculate my pension along with the average of my highest earnings (3 best years in the last 10).

Still need to do some more work but thanks to your help I already feel a little wiser!

[The Leaper]

rugbyleague said:

Thanks everybody off to check my handbook!

Why did you not do that before coming here? It's the obvious first step.

R.

[rugbyleague]

The Leaper said:

rugbyleague said:

Thanks everybody off to check my handbook!

Why did you not do that before coming here? It's the obvious first step.

R.

I didn't know where to look and the words to look for. You maybe knowledgeable about pensions I am not.

Have a lovely day.

[White-Noise]

Mine was done along the lines of 1/60th added per year unless you paid extra. When it was shown on the final benefit statement it had a monetary amount which when I enquired was stated as being an average across all members because it was done on percentages not actual contributions. I swear they made half the stuff up. They closed it anyway in 2021 you're doing very well if it's still gaining.

[rugbyleague]

White-Noise said:

Mine was done along the lines of 1/60th added per year unless you paid extra. When it was shown on the final benefit statement it had a monetary amount which when I enquired was stated as being an average across all members because it was done on percentages not actual contributions. I swear they made half the stuff up. They closed it anyway in 2021 you're doing very well if it's still gaining.

Thanks for this, did your additional contributions show in your yearly statements? Mine is just a single value based on my salary so I want to check that all my contributions are included in the statement.

[White-Noise]

rugbyleague said:

White-Noise said:

Mine was done along the lines of 1/60th added per year unless you paid extra. When it was shown on the final benefit statement it had a monetary amount which when I enquired was stated as being an average across all members because it was done on percentages not actual contributions. I swear they made half the stuff up. They closed it anyway in 2021 you're doing very well if it's still gaining.

Thanks for this, did your additional contributions show in your yearly statements? Mine is just a single value based on my salary so I want to check that all my contributions are included in the statement.

I have a feeling it did but I can't remember sorry. It was all based around what you would be paid today annually, if you retired but then it was linked to inflation so obvs it should grow.

Definitely showed on my payslip!

[alscar]

Whilst you have a handbook do you also have any form of letter or contract detailing what contributions they will be making ?
It may also depend on whether your bonus is contractual or not.
I doubt your car allowance will be be considered as part of the company pension contributions.
Either way you should get at least an annual statement which should show both your and the company’s contributions and the estimated pension etc.
Given your age it may also be possible to get the trustees to give you a transfer value - even if you have no interest in doing so - to hopefully also give you some clarity / comfort.
Years ago my employer decided to stop any bonus’s from attracting pension contributions but in recompense they in effect contributed an additional 6 years of gross contribution in one hit.

[craig1912]

alscar said:

Whilst you have a handbook do you also have any form of letter or contract detailing what contributions they will be making ?
It may also depend on whether your bonus is contractual or not.
I doubt your car allowance will be be considered as part of the company pension contributions.
Either way you should get at least an annual statement which should show both your and the company’s contributions and the estimated pension etc.
Given your age it may also be possible to get the trustees to give you a transfer value - even if you have no interest in doing so - to hopefully also give you some clarity / comfort.
Years ago my employer decided to stop any bonus’s from attracting pension contributions but in recompense they in effect contributed an additional 6 years of gross contribution in one hit.

I think you are over complicating things as lots of these thoughts are not relevant to the OP.

In a DB scheme the contributions an employer makes are not relevant, and no annual statement will show employer’s contributions as what they contribute make no difference. The pension promise is the benefit paid not contribution paid.

Why would a transfer value be appropriate?? He won’t get one anyway as he is still working and still in the scheme.

The advice given so far is good, definition of pensionable salary and read the handbook.

[mikeiow]

rugbyleague said:

Thanks everyone for this, i've found the scheme booklet on line and found a few interesting things.......

My pension contributions/calculations do include bonus and shift premium, not surprisingly they don't include car allowance.

I also found out I can retire with no reduction applied to pension at 62 which I was unaware of.

I also learned that I get an Individual Pension Percentage amount for each year contributed and these are used to calculate my pension along with the average of my highest earnings (3 best years in the last 10).

Still need to do some more work but thanks to your help I already feel a little wiser!

I bet the 62 was a nice surprise!
The other surprise to me was a DB scheme that has more money than it needs - good work by the organisers of the scheme

I wonder what the reductions are should you want to jump earlier?!
Also: if you are able to load up some ISA dosh, that can be used to bridge any gap - eg, if you wanted to finish at 60.

Most important things to plan (as your pension situation sounds pretty good) is how you plan to spend your retirement. Having flexibility to do whatever you like is a beautiful luxury, & we all have different things that float our boat

[alscar]

craig1912 said:

alscar said:

Whilst you have a handbook do you also have any form of letter or contract detailing what contributions they will be making ?
It may also depend on whether your bonus is contractual or not.
I doubt your car allowance will be be considered as part of the company pension contributions.
Either way you should get at least an annual statement which should show both your and the company’s contributions and the estimated pension etc.
Given your age it may also be possible to get the trustees to give you a transfer value - even if you have no interest in doing so - to hopefully also give you some clarity / comfort.
Years ago my employer decided to stop any bonus’s from attracting pension contributions but in recompense they in effect contributed an additional 6 years of gross contribution in one hit.

I think you are over complicating things as lots of these thoughts are not relevant to the OP.

In a DB scheme the contributions an employer makes are not relevant, and no annual statement will show employer’s contributions as what they contribute make no difference. The pension promise is the benefit paid not contribution paid.

Why would a transfer value be appropriate?? He won’t get one anyway as he is still working and still in the scheme.

The advice given so far is good, definition of pensionable salary and read the handbook.

The OP was looking for advice and / or comfort and my reply tried to do that by mentioning certain aspects.
I acknowledged the handbook but also worth a mention of any contractual letter - handbooks aren’t necessarily up to date.
Asking for a transfer letter which as a DB recipient he is entitled to was simply so he could see his actual pot potential - back to the comfort point.
My previous annual statements showed my contributions plus the company contributions.
I don’t think I over complicated anything.
But if I did OP , apologies.

[omniflow]

My final salary pension was made up of two parts.

A fixed portion made up from the pensionable components of my salary * the number of years in the scheme / 60 (based on average of best 3 of last 13 years).
A "SIPP" portion, made up from AVCs that were based on annual bonuses which weren't formally pensionable. These AVCs were paid by the company and were a % of my annual bonus, with the % figure being based on my age.

However, I'm sure all schemes do things differently.

[rugbyleague]

Thanks everyone, advice appreciated eventhough it looks like maybe I should already have known the answers........

The facts are now I know much more than I did a few days ago so posting on here has worked.......thank you again!

62 was a belting surprise, bit scared or retirement though as love my work in a fairly unique role in a unique environment.

We have just had the 1st month of reduced contributions, my wages have just gone up £500 a month because of it which is rather nice too!

I've got 3 DB pensions, a small private pension and other savings so I think, although not particularly planned, I am in a good situation.

I have engaged with a financial planner just to check it all to see if it's all on track though.

Edited by rugbyleague on Monday 25th August 08:55

[Jon39]

A point that might be of interest post retirement (DB).

DB is/was obviously a safe type of pension, because the amount paid out was guaranteed.
Following retirement, annual increases are applied (the scheme rules state how that is calculated).

Interestingly, total dividend income from an equity portfolio can over time, considerably exceed annual DB pension increases.

[bitchstewie]

I think that overlooks that a lot of people either have no clue how to invest so they'll put their pension in an Angolan uranium mine or they'll st their pants when that blue chip equity portfolio takes a 30% hit and sell at the bottom.

Meanwhile the DB just keeps on paying out.