New job new pension

Empty_pockets

Thanks all,

completed the form but not sent it back in yet, they said I am automatically enrolled into the Contribution scheme and have to notify within 3 months if I want to change to CARE.

didn't hear from the IFA so will post my list of questions. I hope you can help

Some basic figures if it helps.
Total debt £81000
Remaining Mortgage £66000
Basic salary £40000
Estimated Gross £55000
29 now, hope to retire at 60.

1. Both offered pensions provide 4xsalary life cover. Should I continue my private policy? pay Aviva £5pm for iirc about £80,000 cover.

2. Do I get a full state pension in addition to this or is it means tested?

3. What is the SP2 provision it refers to?

4. If my salary stays the same, for the next 31 yrs what will Care actually amount to?

5. What if I leave my company after 5 years, what happens to the policy/funds?


Thanks.

marklv

Empty_pockets wrote: »

Thanks all,

completed the form but not sent it back in yet, they said I am automatically enrolled into the Contribution scheme and have to notify within 3 months if I want to change to CARE.

didn't hear from the IFA so will post my list of questions. I hope you can help

Some basic figures if it helps.
Total debt £81000
Remaining Mortgage £66000
Basic salary £40000
Estimated Gross £55000
29 now, hope to retire at 60.

1. Both offered pensions provide 4xsalary life cover. Should I continue my private policy? pay Aviva £5pm for iirc about £80,000 cover.

2. Do I get a full state pension in addition to this or is it means tested?

3. What is the SP2 provision it refers to?

4. If my salary stays the same, for the next 31 yrs what will Care actually amount to?

5. What if I leave my company after 5 years, what happens to the policy/funds?


Thanks.

What do you mean by 'estimated gross'? Is this basic plus overtime? If so, is overtime pensionable pay?

Your overall situation looks pretty good. You are young, you have a modest mortgage which you should be able to clear easily by age 50, and your high starting salary makes it ideal for you to join the CARE scheme. You would be very unwise not to join it.

You would still get a full state pension - this is not means tested. S2P depends on whether your scheme is contracted in or out.

Why would you need extra life insurance when your employer already provides a 4X salary death benefit? If you are not married, I would not do this; if you are then it may be a good idea.

If your salary stays the same then at 60 you should have 50% of your salary as a pension, less any actuarial reduction. The actuarial reduction could quite steep - e.g. 30% of the pension, in which case you would only retire on 35% of your salary.

As your official retirement age is 65 you need to find out from your pension fund people how much the actuarial reduction would be if you left at age 60. If the reduction is high, then I suggest you forget about retiring at 60 and consider working until 62 or 63 at least.

barny_100

marklv wrote: »

Indeed, and regrettably, this is now the only option for most people. I am not saying that it is a bad move in itself, if there is no other choice, but it is very high risk - no certainty as to your returns. This risk can be mitigated by spreading the investments across a variety of different investment vehicles, but lower risk also means less gain. Therefore, in this comparison, the guaranteed salary linked pension wins handsomely.

What I was getting at is a DC can be quite "low risk" as if it's like mine the investments would have to drop 50% before "I" lose money. As I put in 6% of my salary and my employer matches that. So you could say up to 50% loss you've only lost out on the free money.

Better that message getting out than putting people of DC completely.

Empty_pockets

Marklv

Estimated gross is Basic 39 + Shift allowance 5 + South east allowance 1 + overtime 5 + some rental money I have coming in.

Document states 'Your entitlement for a basic state pension will continue, depending on your NI record. As the CARE scheme is contracted out of the SP2, you will not build up any SP2 whilst a member of the scheme' - I'm not sure what this means!

I took the life insurance policy out years ago when I was self employed. As it's only £60 pa I thought it worthwhile. I maybe wrongly assumed, if I ever did need to take a policy out again the premium would raise considerably with age.

Can you explain how you get the 50% figure?

If I stopped work at 60, could I continue to pay the 7.2% £200odd into the policy (from my ISA) until I reached the required age even though I no longer worked for the company??


Thanks, this is a great help.

marklv

Empty_pockets wrote: »

Marklv

Estimated gross is Basic 39 + Shift allowance 5 + South east allowance 1 + overtime 5 + some rental money I have coming in.

Document states 'Your entitlement for a basic state pension will continue, depending on your NI record. As the CARE scheme is contracted out of the SP2, you will not build up any SP2 whilst a member of the scheme' - I'm not sure what this means!

This means that your S2P will only cover you for those years you worked before you joined Network Rail. In other words you won't get much from the S2P - I guess £12-15 a week or so in current money.

Empty_pockets wrote: »

I took the life insurance policy out years ago when I was self employed. As it's only £60 pa I thought it worthwhile. I maybe wrongly assumed, if I ever did need to take a policy out again the premium would raise considerably with age.

Can you explain how you get the 50% figure?

If I stopped work at 60, could I continue to pay the 7.2% £200odd into the policy (from my ISA) until I reached the required age even though I no longer worked for the company??


Thanks, this is a great help.

The life insurance is not really worth it, in my view, but it's your decision.

The 50% figure comes from the pension accruing at the rate 1/60th of salary for every year of service. Can you confirm that this is the accrual rate? And - as I said before - you need to find out about whether, and if so by what rate, your pension is actuarially reduced for early retirement.

Empty_pockets

Yes, it states your pension is based on pensionable pay in each scheme yr of membership, the formula being 1/60 x PP.

I'll cancel the life insurance..

Thanks.

marklv

"If I stopped work at 60, could I continue to pay the 7.2% £200odd into the policy (from my ISA) until I reached the required age even though I no longer worked for the company??"

I don't know what you mean. Once you stop working you can no longer contribute into the company pension.

marklv

Empty_pockets wrote: »

Yes, it states your pension is based on pensionable pay in each scheme yr of membership, the formula being 1/60 x PP.

I'll cancel the life insurance..

Thanks.

OK, but please do check with you pension fund people about the actuarial reduction - this is critical to what you will end up getting.

Empty_pockets

Not sure if this is the same as actuarial reduction.

'When can I take my pension? - From age 65 without reduction.'

Empty_pockets

Also are pension funds transferable?