WYPF query
Comments
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Hmm, if 23 years old try to do this in private sector, assuming that the no contribution from the employer. Assuming that nothing changes and get 45/49 which is 90% of the pension aka £24,900 a year by 68, a person may need to pay in £832.50 or 37% of the salary per month throughout the working life and if the market was favourable and that not even taking into account of death in service benefit or ill-health retirement as well. So it is pretty sweet deal. :cool:
Of course, over next forty five years, we may go through seven crashes / financial crisis or so so it is really unpredictable thus DB pension schemes are pretty sweet to give you a guaranteed income amidst all the uncertainty.0 -
JoeCrystal wrote: »Hmm, if 23 years old try to do this in private sector, assuming that the no contribution from the employer. Assuming that nothing changes and get 45/49 which is 90% of the pension aka £24,900 a year by 68, a person may need to pay in £832.50 or 37% of the salary per month throughout the working life and if the market was favourable and that not even taking into account of death in service benefit or ill-health retirement as well. So it is pretty sweet deal. :cool:
Of course, over next forty five years, we may go through seven crashes / financial crisis or so so it is really unpredictable thus DB pension schemes are pretty sweet to give you a guaranteed income amidst all the uncertainty.
I pay in (or have paid in) 33% of my salary in to my DC pot. If I retire at 67 (according to HL) I will get 70% of my current pay. The disparity between DB and DC is unbelievable and I know I am rare amongst my peers in terms of the amount I tip into my pension.
Plus I get exposed to all the risks of the stockmarket and risk hitting the lifetime allowance :rotfl:Gold plated is an understatement - DB pensions are made of pure platinum!Thinking critically since 1996....0 -
Given the late age of retiral with the LGPS in the future, I would consider a PP, Sipp or the AVC.
AS she could live on this pot waiting for her DB pension to pay out without reduction.
I agree with this principle and am doing the same myself. However as she's so young there's a good possibility she won't be in a DB scheme for her whole career. So it could also be argued that a future DC scheme can be used for that purpose and she should take advantage of being in a DB scheme now and buy additional pension while she can. This can always be reviewed in the future.Don't listen to me, I'm no expert!0 -
Given the late age of retiral with the LGPS in the future, I would consider a PP, Sipp or the AVC.
AS she could live on this pot waiting for her DB pension to pay out without reduction.
Hi Atush
thanks for this - but do you mean the late age of retirement with LGPS? My daughter has an Aviva Stakeholder pension - just commenced this year also and contributes £200 gross pm to this.
So you are suggesting the AVC could fill the gap if she wished to retire before the formal LGPS retirement age? That's an interesting thought!
Tarama0 -
somethingcorporate wrote: »Just to put it into perspective, paying £1755 gross (£1200 net) for £551p.a is rediculously good value. You'd need roughly £14k @ 4% drawdown to match that so £1,200 for a £14k benefit value is amazing.
For this reason you can see why public sector DB schemes take a lot of flack (deservedly so). For comparison it costs me around £7,500 net to get £17k into my DC pot (including employer contribution) worth around £700pa.
Somethingcorporate
yes when you consider it in these terms the WYPF makes very sound financial sense. From a personal perspective I think as a public service worker on the front line - there is an enormous amount of stress in these types of jobs. In the past I have worked in the sector my daughter is currently working in too and it is tough.
again a lot to reflect on here Thanks
Tarama0 -
JoeCrystal wrote: »Hmm, if 23 years old try to do this in private sector, assuming that the no contribution from the employer. Assuming that nothing changes and get 45/49 which is 90% of the pension aka £24,900 a year by 68, a person may need to pay in £832.50 or 37% of the salary per month throughout the working life and if the market was favourable and that not even taking into account of death in service benefit or ill-health retirement as well. So it is pretty sweet deal. :cool:
Of course, over next forty five years, we may go through seven crashes / financial crisis or so so it is really unpredictable thus DB pension schemes are pretty sweet to give you a guaranteed income amidst all the uncertainty.
Hi JoeCrystal
yes it is a good deal and I am happy that my daughter is in a position to avail of it. Of course we don't know what will happen to the welfare state over this time period either??
Tarama0 -
somethingcorporate wrote: »I pay in (or have paid in) 33% of my salary in to my DC pot. If I retire at 67 (according to HL) I will get 70% of my current pay. The disparity between DB and DC is unbelievable and I know I am rare amongst my peers in terms of the amount I tip into my pension.
Plus I get exposed to all the risks of the stockmarket and risk hitting the lifetime allowance :rotfl:Gold plated is an understatement - DB pensions are made of pure platinum!
Somethingcorporate
I love the platinum analogy!!
Tarama0 -
I agree with this principle and am doing the same myself. However as she's so young there's a good possibility she won't be in a DB scheme for her whole career. So it could also be argued that a future DC scheme can be used for that purpose and she should take advantage of being in a DB scheme now and buy additional pension while she can. This can always be reviewed in the future.
Hi Kynthia
when I was my daughters age I didn't even know what a pension was!!! So hurrah for MSE!! She is very young and may consider a career change so I suspect she may not be in a position to access a DB scheme for her entire career and she may wish to work PT etc. But I suppose whilst it is available she will take advantage of the DB advantages. It's a matter of working out how much is affordable and to have a life whilst doing so.
On her salary it is going to be very difficult to build up a good house deposit and I won't be in a position to help her with the deposit until I retire. I estimate the most I can stick is to work for another 5 years and it may well be less than that.
But I can see the benefits of accessing the additional pension - for the reasons you state - we will try to work out both aspects - the advantages and disadvantages of APCs and AVCs. In the meantime she has an Aviva Stakeholder pension so we need to consider retirement age for this etc.
thanks for all the replies and again Hurrah for the wealth of experiences and kindness to everyone sharing their experiences
Tarama0 -
Hi Atush
thanks for this - but do you mean the late age of retirement with LGPS? My daughter has an Aviva Stakeholder pension - just commenced this year also and contributes £200 gross pm to this.
So you are suggesting the AVC could fill the gap if she wished to retire before the formal LGPS retirement age? That's an interesting thought!
Tarama
I wouldn't take the AVC earlier than the main LGPS benefits otherwise it can't all be taken Tax Free, from the scheme guide:
Take your AVCs as cash
You can take some or all of your AVC fund as a tax-free cash lump sum but you can only take it all as a lump sum if you draw it at the same time as your main LGPS benefits and provided, when added to your LGPS lump sum, it does not exceed 25% of the overall value of your LGPS benefits (including your AVC fund).
To fill the gap if she wished to retire early, and not take the LGPS with an actuarial reduction then a PP or SIPP as well is a better option as that would still leave the AVC pot there to be taken tax free - a minimum 20% win straight away.0 -
If the AVC is new, I dont think that counts anymore. I think the AVC had to be open by 2014?thanks for this - but do you mean the late age of retirement with LGPS? My daughter has an Aviva Stakeholder pension - just commenced this year also and contributes £200 gross pm to this.
Basically, it could be a pension age of 70 for her to take her DB pension unreduced. Having one (or more) DC pensions means she could retire before that age, and not have her pension reduced for taking it early.
As an example, taking an age 65 pension at 60 could be reduced by 25%. Taking it at 55, 50%. An age 70 pension (as might be when she gets there) would be reduced 25% at age 65, 50% at age 60 etc.
This is why i didnt suggest buying additional pension. Hard to make a case for paying full price for something, that will be reduced in value to that extent.0
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