Final salary scheme calculation

Rupert_Bear

HI,

I need some help for one of my friends. They have received their final salary details for 2008/09. Shown on the statement is 8 years pensional service. With lower pension amount deducted it is based on £14,720 per annum.

They are quering the figures. Can someone advise what would the pension be if it was 1/60th and 1/80th per annum. Also based on the above years and they decided to take a lump sum, how can they find out what the lump sum would be.

Cheers.

MikeJones_2

Hi RB,


There are four essential factors in how benefits from a final salary pension scheme may be calculated (as quoted from the following Factsheet):

• the length of the pensionable service you are credited with as being an active member of the scheme
• your pensionable salary
• the formula or rate of ‘accrual’ which uses service and salary to work out your pension
• the circumstances under which benefits are taken from the scheme (retirement, early payment, early leaver, ill-health, death etc).

Rather than reinvent the wheel, you can read more about them here:

- What is a final salary scheme (Active Members)

IF your scheme's formula used the figures you have quoted then on the 60ths accrual basis the pension accrued so far MIGHT be:

8/60 x £14,720 = £1,962.67 p.a.

If the formula uses 80ths for the pension, the pension MIGHT be:

8/80 x £14,720 = £1,472 p.a.

They're big ifs though, so you need to check.

In terms of the tax free cash lump sum, that will depend upon a formula which would be contained in the scheme rules, so difficult to guess from what you have posted.

Hope that helps?

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

yelf

for a 1/60ths it would be 8/60 x 14720 = £1962.

for 1/80s it would be £1,472.

edit: posted exactly same time as above