Comparison of pensions

chateauneufdupape

I am thinking of changing employer and wish to compare their pensions. My current employer offers a final salary scheme which they have said they are committed to maintaining. This has been demonstrated through increased contributions from employee and employer over the last couple of years. Currently employee pays 7.5% and the employer pays 18.2%. They have now closed this to new starters.

The new company offers a defined contribution scheme. The maximum input is 5% employee and 7% employer.

Assuming my salary is the same with both companies, say £40k, how do these two pensions compare? Is it possible to equate them to an effective difference in salary? I assume the defined contributions scheme is not as good as the final salary scheme.

Please help as I do not know where to start.

Thanks

dunstonh

In addition to the 5% from you and 7% from employer on the new scheme, you would need another 3 to 8% p.a to match benefits on the old scheme. Even then, you are dependent on investment performance. That would depend on the funds available and then which you choose and a lot of unknown variables.

All things being equal, the current employer pension is better.

Obviously figures are rough but should give you an idea of the sort of advantages a final salary scheme has.

chateauneufdupape

Thanks dunstonh,

So if i averaged your figures of 3% and 8% to give 5.5% of salary, the new company would have to pay about £40k X 1.055 = £42.2k to be on a level par with my current of £40k.

chateauneufdupape

Using the pension calculator at this site, http://www.pensioncalculator.org.uk/pages/home.php, it works out to an equivalent of 6.4%, so you were spot on.

dunstonh

So, the other job would have to be at least 6.4% better than the old one. Either in money, prospects or satisfaction.