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    • MoneyMonkey
    • By MoneyMonkey 12th Oct 17, 8:38 PM
    • 130Posts
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    MoneyMonkey
    Confusion about the value of pension from last company
    • #1
    • 12th Oct 17, 8:38 PM
    Confusion about the value of pension from last company 12th Oct 17 at 8:38 PM
    A couple of years back, I left my BAE Systems, along with it's final salary pension scheme . At the time I thought I understood roughly what to expect at NRD. In my annual pension statement, it said if I had left the Scheme on <insert date here>, my pension at NRD would have been based on something like 48% (my contributions) x final salary, giving in the region of £17k a year. I take this to mean that would be roughly what I'd get at NRD (accrual and longevity factors will obviously play a part too).

    I just recieved a 'deferred benefits statement', and the headline is something closer to £12k a year - quite a difference!

    I suspect that I am missing something here! Are the benefits reduced when you leave the final salary scheme, or does this figure just means something else? Any ideas anyone?

    Thanks,
    MM
Page 1
    • Silvertabby
    • By Silvertabby 12th Oct 17, 8:57 PM
    • 1,671 Posts
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    Silvertabby
    • #2
    • 12th Oct 17, 8:57 PM
    • #2
    • 12th Oct 17, 8:57 PM
    It isn't your contributions that determine a final salary pension - it's the accrual rate.

    Your pension hasn't been reduced - I think you have misunderstood the way it works.

    I've just had a google, and it looks like you had the option of a 1/80th accrual rate - or 1/60th subject to paying higher contributions (which is unusual?).


    Retirement

    When you retire you will receive a pension that relates to your earnings and length of service.

    Your pension will be calculated as the product of:


    • your Final Pensionable Salary,
    • the number of years of your Pensionable Service, and
    • the accrual rate applicable to your chosen contributions.
    For example:
    Assuming your Final Pensionable Salary was £15,000 and you completed 15 years’ Pensionable Service, your pension would depend on the contribution level paid:

    1/60 x £15,000 x 15 years = £3,750 per annum or


    1/80 x £15,000 x 15 years = £2,812.50 per annum
    Last edited by Silvertabby; 12-10-2017 at 9:04 PM.
    • MoneyMonkey
    • By MoneyMonkey 12th Oct 17, 9:13 PM
    • 130 Posts
    • 33 Thanks
    MoneyMonkey
    • #3
    • 12th Oct 17, 9:13 PM
    • #3
    • 12th Oct 17, 9:13 PM
    Thanks for the reply Silvertabby.

    I suspect that it was the wrong terms I was using in the post.

    From memory,

    the accrual rate was 1.67% per year
    the years of contribution was about 28
    final salary was say £36k
    = ~16.8k per year

    This is similar to what I had on the old statement before leaving. The question for me is why the deferred pension seems to be about £12k per year!
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    • hyubh
    • By hyubh 12th Oct 17, 9:39 PM
    • 1,912 Posts
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    hyubh
    • #4
    • 12th Oct 17, 9:39 PM
    • #4
    • 12th Oct 17, 9:39 PM
    the accrual rate was 1.67% per year
    the years of contribution was about 28
    final salary was say £36k
    = ~16.8k per year

    This is similar to what I had on the old statement before leaving. The question for me is why the deferred pension seems to be about £12k per year!
    Originally posted by MoneyMonkey
    Hmm, my maths is not great, but doesn't this back up what Silvertabby intimated? Namely, you were actually in a 1/60ths section, but this latest figure you've received assumes 1/80ths? (28 x 36K x 1/80 = 12.6K.) Get in touch with the administrator (Equiniti, but ex-BAE) and ask them to explain themselves (https://www.baesystemspensions.com/285/contact-details).

    PS - there will be some revaluation on the pension amount on leaving too.
    • Silvertabby
    • By Silvertabby 12th Oct 17, 9:40 PM
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    Silvertabby
    • #5
    • 12th Oct 17, 9:40 PM
    • #5
    • 12th Oct 17, 9:40 PM
    Looks like it's down to the the accrual rate.

    Using your figures and the BAE example copied into my Post No 2:

    1/60 x £36K x 28 years = £16,799.93 per annum or

    1/80 x £36K x 28 years = £12,600 per annum

    If you are sure that you (always) paid the higher contributions needed for the 1/60th accrual rate, then you need to query it with BAE.
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