Local government pensions and the Tories

Old_Slaphead

DiggerUK wrote: »

Then the figures can be improved on.
As it means they only need to put away 5K a year to get a 50% final salary pension, it comes down to 420 per month. About a third of take home pay. Better than astronomical, but still eye watering.

Can an IFA give a better alternative, or comment on marklv's figures.

Not sure why an IFA is needed.

Using historical rates of inflation/growth - contributions of around 30%-34% of wages are needed to match the returns offered by public sector pension schemes (and given the abject performance of UK plc under Labour, it will need significantly more than that). This also assumes that employee receives no promotions.

This is supported by the fact that LGP Schemes are currently receiving contributions totalling 24% of payroll (ie 6-7% employee and 17% employer) and are still well underfunded.

DiggerUK

Old Slaphead,

I'm not looking sideways at getting an equivalent PP provision to PSP.
I'm looking at the costs involved if everybody went private.
I'm only asking for an IFA to give an outline of how they would advise a 21 year old to go about achieving a 50% final salary pension. Either it's possible and affordable, or a ridiculous target.

They are usually very free with their advice in such situations.
And yes, I appreciate my signature doesn't help. But I have offered a truce.

seagull112

marklv wrote: »

Thank you for enlightening me. What the tables do not show is limited indexation, say up to 5% a year maximum. Anyway, even £15k is 75% of the example person's salary, is it not?

Actually my calculation was not based on an example salary of £20,000 but on a final (aspirational) salary of £43,000.

I took the (aspirational) figures from one particular public sector worker, who was earning this amount at the age of 37, and worked out a pension contribution for the 21 year old that would generate the same rewards on retirement at age 60.

The figures were:
Salary: £43,000
Pension at age 60: £20,425
Tax-free lump sum: £61,275

To be totally accurate... I did not work them out ... the Aegon / Scottish Equitable pension calcualtor worked them out, so I'm assuming that all variables were, as much as is possible, factored into the equation.

By the way ... I'm not trying to 'hit the public sector', I'm simply trying to open peoples' eyes to the problems ahead and try to engage them in seeking an equitable solution (without resorting to punching anyone in the face!).

DiggerUK

Seagull,
I can't get through to your calculator.
Is it possible for you to run our 21 year old on 20K through and give us the figures.

Come on IFA's, there is a truce on.

Old_Slaphead

DiggerUK wrote: »

I'm only asking for an IFA to give an outline of how they would advise a 21 year old to go about achieving a 50% final salary pension. Either it's possible and affordable, or a ridiculous target.

My calcs

Starting salary £20,000
Inflation at 3.5% pa
Salary after 40 years ££76,000

Contribs at 30% using compound growth at 3% pa. Fund value = £836,000

Pension (depending upon age taken- say 60ish) would be roughly £40,000 pa or 48% of final salary.

Clearly "ridiculous target" unless employer/taxpayer prepared to chip in - big time.

seagull112

DiggerUK wrote: »

Seagull,
I can't get through to your calculator.
Is it possible for you to run our 21 year old on 20K through and give us the figures.

Come on IFA's, there is a truce on.

I'd be happy to, but there are a number of variables that you can add, which tailor it to your individual circumstances. You can also vary the amount you would like / need as a lump sum on retirement to see how that affects your future annual pension.... so really it's better if you do it yourself... it would give you much more useful information.

As I said, because I'm a new user I can't post links! However this is the website address without the www. (Just add www. in front of it when you type it into your browser)

aegonse.co.uk/advisor

When this page opens, there's a link at the bottom left hand side, which says:
Helping clients plan for the future?

If you click on this it will take you through to the pension calculator.

Good luck!

seagull112

DiggerUK wrote: »

Seagull,
I can't get through to your calculator.
Is it possible for you to run our 21 year old on 20K through and give us the figures.

Whoops! Sorry ... I thought you were asking about figures for your son or daughter but it's just occurred to me that you may still be talking about our 'fictional' 21 year old?!

Apologies if this is the case....

seagull112

DiggerUK wrote: »

Seagull,
I can't get through to your calculator.
Is it possible for you to run our 21 year old on 20K through and give us the figures.

OK .. I've done it ... using the Aegon / Scottish Equitable calculator...

- 21 year old
- starting out now
- aiming for a pension of £20,000 (it todays money)
- recieving NO lump sum on retirement
- increasing their pension contributions by 3% per year

would have to put in £517 per month (including tax relief)

Hope this helps.

DiggerUK

Seagull,
I did a different calculation.
In today's values, aiming for an annual pension of 10K, with a 50K lump sum.
I ran it through for retirement at 60, 65 and 68.
I added 4% and 5% increase in payments each year.
These are what a 21 year old would have to start with today.

At 60 + 4% would be 275 a month.
At 60 + 5% would be 230 a month.
At 65 + 4% would be 190 a month.
At 65 + 5% would be 160 a month.
At 68 + 4% would be 140 a month.
At 68 + 5% would be 115 a month.

Who needs an IFA when you can do it yourself.
http://www.aegonse.co.uk/pensions/saving-for-retirement/calculators/how-much-to-expect/index.html

Anybody else want to play with the chart to check workings out. Can any IFA vouch for this sites viability.

As our 21 year old would not get state pension till 68 it does seem a grim set of figures, at today's values that would add about 4.5K per year.

EdInvestor

Of course it is always worth remembering that for anyone contracted in with a full employment record, the two state pensions will pay out 8-9k p.a. That's index linked with 100% spouse pension (for unlimited spouses) and no gender distinction.

So the company pension target is perhaps not as high as posters are suggesting.

It's always worth getting your own individual state pension forecast as everyone is different.
www.thepensionservice.gov.uk