Railway Pension - Defined benefits or defined contribution?

Hick

Hi everyone,

I am shortly to start work as a graduate with a TOC and have been offered the choice of a defined contribution pension (5% matched 1 1/2 times) or a defined benefits pension (10.48% employee contribution).

I think I am getting my head around the differences between the two and so am leaning towards the defined benefit scheme because of their increased rarity and that the strength of unions in the sector leads me to believe that the benefits will still be pretty good, even after privatisation and that increases in employee contributions will be fairly limited.

Are my assumptions valid or are there factors that I am not considering here?

Any help will be gratefully received!

testertrev

Defined Benefit without doubt. Don't forget that at 40/60 the employer is paying a 15% contribution, so it's a no brainer really. (Asssuming you are OK with contribution rate)

:beer:

Andy_L

It depends what the defined benefits are, eg the accrual rate, retirement age, spouse/dependents benefits, scheme rules on future increases etc.

Alikay

As Andy L says, have a good look at the details. But having worked in payroll for 2 rail industry giants, if I were a young graduate I'd do what testertrev says and go with defined benefits option. Very good pensions in general, even if the old BR boys whinge that it doesn't compare with the pre-privatisation package!

Hick

Thanks guys, I went for the final salary in the end, now to work on increasing that salary!

testertrev

Alikay wrote: »

. even if the old BR boys whinge that it doesn't compare with the pre-privatisation package!

I wouldn't dare!;)