Do I take the offer or stick with Final Salary?

cownet

Hi peeps, I am looking for some wise words on my company pension scheme.

The Company I work for has had a few problmes over the last few years or so with the Fianl Salary Pension, which they have tried (put £10mill extra in) to sort out.

It is now the case that if I want to stay in I will have to increase my contribution from 3.5% to 6.5% to stay in the scheme.

OR,,,,, I can opt into the Money purchase and have a choice of 2 ,4 or 6%

But as an offer they will put in an extra 15% of contributional earnings.

Every person you ask always says with out asking about offer straight away STAY in no matter how muchg it costs. and If I was in my later work life then I might think the same.

I am only 33 and have been in this scheme for 5 yrs.

Both offer 25% lump some at 65yrs (60 or 55)

The fianal salary would give me a pension salary of last two years div by 2

Preserved benefits on leaving are 1/60th final salary pensionable earnings X pensionable service or Fianl salary

Or fund remains invested unitl retirement for money purchase.

So with the 15% some 14.% above the companys standard money purchase scheme and me bening more than likely to move company in the next 30yrs

Should I stick with it and pay the extra in to the final salary ( extra 3%)

Or take the money purchase scheme and get a 15% input

Thanks in advance for your replies
Doug

EdInvestor

But as an offer they will put in an extra 15% of contributional earnings.

Is that a one-off or every year?

cownet

Hi there, Thanks for the reply,

The 15% is every year

Gorgeous_George

Or is it 15% every year until they change the rules again.

It's a difficult one and, without all the detail, nobody would be able to provide sound advice. The main detail being "How long will you live?".



GG

EdInvestor

Hmm.A big difference between money purchase and final salary has always been the big difference between the company contribution - here, that's not the case.

Pro the final salary scheme is that the investment risk is with the company.
Pro the money purchase is that although you take the risk, you also get much more flexibility and transparency.

It's difficult to move final salary schemes later, even when it's good to do so.And you may be severely penalised if you want to take the pension early. Also,despite the new Protection Fund, there is still no absolute Government guarantee that the pension will be there on retirement.

Do you have any info on the provider of the money purchase scheme, the funds you can invest in and the charges you will pay?

cownet

Hi Ed and thanks again,

I agree as the 15% is quite generous as if i joined it when i started i would only have got 1.5% contribution.

I have the option of contributing 2,4 or 6% giving me 17,19 or 21% respectively

I can then invest in one or more of the following investment funds provided by Barclays Global Investors (BGI)

Aquila Life - Consensus
Aquila Life - Uk Equity Index Fund
Aquila Life - Overseas Consenus Fund
Aquila Life - Over 15 years UK gilt index fund
Aquila Life - cash fund

Denoted as a percentage upto 100%

Or 100% solely in Lifestyle. Which is a lifesyle investment strategy which uses; Consensus Fund during most of working life, and the Long dated Gilt Fund and Cash Fund shortly before retirement.

I hope you understand all this as I don't !!!

Again any help would be gratefully received.
ta

cownet

Gorgeous_George wrote:

Or is it 15% every year until they change the rules again.

It's a difficult one
GG

Yeah I tend to agree, but more on the basis of the fund has been short for a few years and they have tried to sort it out. ( more than some companies have done) with substantial topups

I am concerned that the 15% this year may not be there next year when they ask for more again.
An increase of 3% is hard to swallow but to think I might have to add more again next year and then they do not offer the 15% they are this year would hurt badly.

Thanks for the reply
D

EdInvestor

The parent funds are listed here in the BGI group, but there is no listing for the underlying funds so no info about their performance.The selection is pretty basic.

Can you find out about the charges?

cownet

Ok found this page CLICK ME that has some more info.

Charges are;

Consensus - 0.15% pa
Uk Equity Index Fund - 0.10% pa
Overseas Consenus Fund - 0.25% pa
Over 15 years UK gilt index fund - 0.10% pa
Cash fund - 0.15% pa

Is that good bad?

dunstonh

Charges are good (as expected). fund range is pretty naff though.

EdInvestor

Those charges are very low indeed, outstandingly low for a pension. But this is because the only funds on offer are trackers plus gilts and cash.

I think I'd probably want some better investment choices as an incentive to leave a final salary scheme, especially since the new Protection Fund means that companies can't welsh on their responsibilities easily now.

Now if the company was to offer to pay the 15% into the SIPP of my choice.....;)