Quite urgent, need help comparing job offer to existing job

freestyle_3 · 10 March 2006 at 11:28AM

I am in the process of being offered a job.

The company I am looking to move to is a lot smaller, they have no pension scheme and no other benefits other than salary and xmas bonus.

Being only 26 and having worked in my company since I left school at 17, I signed up to the pension and never really have taken much of it in.

However one thing I think I am sure of is that I do not have a final salary pension.

Questions:
How can I got about comparing how much benefit the pension I pay into is worth. ie if I need to start a private pension scheme what extra money will they need to pay me in order to match what I am on. From what I remember my existing company contributes an amount of money as do I.

Slightly off topic but for the same reason, if you can think of anything else I should consider. For example, my existing company has some form of death cover..

As they are only a small company, I think each person there does their own thing, which is fine. But clearly I need a salary to match

dunstonh · 10 March 2006 at 11:37AM

How can I got about comparing how much benefit the pension I pay into is worth. ie if I need to start a private pension scheme what extra money will they need to pay me in order to match what I am on. From what I remember my existing company contributes an amount of money as do I.

You say the existing scheme is not final salary. So, this means it will be a defined contribution scheme. This makes it easier to compare as you only need to find out what percentage contribution the company makes. This is almost certainly going to be in the scheme booklet although it should be just as easy to find out by asking the person who deals with pensions there.

freestyle_3 · 10 March 2006 at 1:50PM

Thanks so far.

I have just found out that I am on a final salary pension. My average salary for the last 3 years is £40K.

I have worked in this company for 6 years.
I am 26 years old.

So the option to take a new job without any pension scheme is a serious issue.

Knowing nothing about pensions. If I leave my existing company, can I assume that the pension scheme will 'freeze' and I will still benefit from where I am today ?

I am not sure if I have explained that correctly, but if for example I was at retirement age. Can I take it I would be getting paid from the scheme on an annual basis ? And regardless of the fact I still have 40 odd years left has nothing to do with the amount that I will get paid in the future ?

dunstonh · 10 March 2006 at 3:12PM

Ahh, things now change. A final salary scheme is a valuable benefit. It is also harder to quantify the benefits in monetary terms. However, a rough yardstick would be that replacing it would cost around 15% of your salary.

Knowing nothing about pensions. If I leave my existing company, can I assume that the pension scheme will 'freeze' and I will still benefit from where I am today ?

Yes. Your benefits would be remain as 2 number of years service but the pensionable salary they base it on would be increased annually at a rate roughly similar to inflation.

I am not sure if I have explained that correctly, but if for example I was at retirement age. Can I take it I would be getting paid from the scheme on an annual basis ? And regardless of the fact I still have 40 odd years left has nothing to do with the amount that I will get paid in the future ?

It would pay monthly but apart from that, yes.

EdInvestor · 10 March 2006 at 7:11PM

I suggest you contact these people for free advice about how to work out much you will get from the final salary pension when you retire:

https://www.opas.org.uk

Have your scheme booklet to hand in case you need to give them any info.

As far as the new job is concerned, the main thing you still need to know is what percentage of your salary your present company is contributing to the scheme.

freestyle_3 · 10 March 2006 at 7:39PM

Ok thank you both, you have both helped me.

This is a tricky one then in terms of deciding whether to move or not. I guess I should'nt just stay working for the same company for the rest of my life if I feel that job satisfaction is something important.

And yes the 15% was mentioned this afternoon when I called. He explained that I pay %3.5 and they pay about 15%.

So of course this is the tricky bit. If for example this smaller company agreed to pay me 15% on top of what I earn, from what I understand this still would not really match the final salary scheme because of the fact that a monthly amount will be paid for as long as I live from retirement, and more over pay my spouse something after I go.

I guess where I am comming from is the smaller company seem willing to make me a good offer. I want to identify what I should be asking for over and above the basic salary so that I can setup my own pension plan if I decide to move.

In case your wondering I do really want to move, just want to make the right decision when it comes to my life planning.

Finally I will take a look at that website, it may well answer my questions further

Oh one last thing. To freeze or move.. which is best ?
Finally what about cashing it all in ? and what is this lump sum stuff I hear of

dunstonh · 10 March 2006 at 8:27PM

Oh one last thing. To freeze or move.. which is best ?

Usually best to leave it where it is when final salary schemes are involved. Always exceptions but they are rare.

Finally what about cashing it all in ? and what is this lump sum stuff I hear of

Unless you have less than 2 years, you cannot.

In case your wondering I do really want to move, just want to make the right decision when it comes to my life planning.

If you want to move and the other company are offering 15% more gross and you put the bulk of that towards your retirement planning, you wouldnt be too far off. At age 26, if you were even to put in 10% and keep the 5% towards short term savings, you would do alright. The most important thing if you put your own retirement planning in place, and its thing that most forget to do, is make sure your contributions increase with inflation. So that x% remains the same.

If the company are that keen on you and want to pay more, ask about them paying it in for you in a form of salary sacrifice.

freestyle_3 · 11 March 2006 at 4:27AM

Thank you once again for the reply. I am very greatful for the free advice you have given, not to mention your personal time.

I think you've raised a key point in regards to inflation. Firstly my basic salary should at the very least increase with inflation, I am waiting for them to confirm this.

But in addition, if they are able to pay an extra 10-15% that I can put into a pension, then that too will need to increase by inflation.

Are there any benefits for them putting money into a pension on my behalf rather than me doing it directly ? I guess it might make their payroll look better

Quite urgent, need help comparing job offer to existing job

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