Advice required for brother in denial!

London_Town

Just an update on my brother's situation and a request for comments:cool::cool: please. It now transpires that while they closed the Final Salary Scheme to him, he is able to join a new pension they offer called a Defined Contribution Scheme.

Reading some notes he gave me from the company seem to outline the following. His contribution rate will be 5% (taken from his monthly gross salary - so tax free) and the company will contribute 8%. The scheme pays out at 65 with an option to take a reduced pension and a lump sum, or just the bigger pension.

This sounds like an excellent deal to me, as the company contribution is essentially "free money" and his contribution is tax free. While it's not as good as the Final Salary Scheme that went before, it sounds like the next best thing. Am I right in thinking he should definately join up? He's waiting for my feedback on the scheme!

Assuming he does join up, is there any way to assess what he may see in an annual pension at 65, after paying in for 23 years. I think his current wage is around the £20,000 pa mark.

Thanks

barny_100

Sign up today -simple as that. 5%-8% is very good. 160% extra free is not to be sniffed at.

I'll leave the estimates to someone else...

seven-day-weekend

Yes. Join instantly.

No good at number-crunching, sorry!

jamesd

London_Town wrote: »

His contribution rate will be 5% (taken from his monthly gross salary - so tax free) and the company will contribute 8%. The scheme pays out at 65 with an option to take a reduced pension and a lump sum, or just the bigger pension. ... Am I right in thinking he should definately join up?

He should sign up immediately. That's quite a nice scheme. It may have online tools that will help him to work out what his future pension will be.

London_Town wrote: »

Assuming he does join up, is there any way to assess what he may see in an annual pension at 65, after paying in for 23 years. I think his current wage is around the £20,000 pa mark.

Try the pension calculator at Hargreaves Lansdown.

Using a date of birth of 6/4/1967, male, 20k salary, 4500 target personal pension payout in today's terms (today's money equivalent), retirement age 65, personal contribution 5% and company contribution 8% the payout is 3,862, falling short a bit.

I used a target of 4500 because his income isn't enough to get him the maximum additional state pension. His state pension forecast will give him an idea of what he'll get from both basic and additional. Then he can put in the target income he wants from the personal pension to get to whatever total he thinks he'll need.

If he's content to live on 8-10k a year he shouldn't have trouble getting to that sort of range with the minimum contributions in the work scheme. If he wants more he'll need to increase his.

London_Town

Thanks for the replies, much appreciated. By showing him this thread, as well as explaining what a good deal it looks, I should motivate him to sign up.