Final salary vs Money Purchase - transferring job

parahandy

I am in a bit of a predicament. I will hopefully have the option of changing my job within my employer - not my choice, should have TUPE'd somewhere else, but 3rd party rejecting, so tribunals, etc, etc.

There is a possibility that the 3rd party may come to some kind of compromise, but if I transfer my job, I probably won't be able to take that up.

The package I should get - if I had been made redundant - is about £11k.

I am currently in a Final Salary scheme. I could take the other job as a new employee, which is fine, but I would need to start again with holiday entitlement, and more importantly, I would need to start a new pension, and this would be a Money Purchase scheme.

My MIL reckons I should think seriously about this - foregoing the compensation or tribunal if it comes to that, and just staying with the company to retain my pension.

I know our FS scheme is a good one, but £11k is a lot of money to turn down...

Any recommendations?

MrChips

What benefits does you current scheme provide, i.e accrual rate, normal retirement age, level of pension increases? How many years of service do you have, and what is your pensionable salary? What is the level of employee contribution?

What is the likely level of employer contribution in the MP scheme?

parahandy

MrChips wrote: »

What benefits does you current scheme provide, i.e accrual rate, normal retirement age, level of pension increases? How many years of service do you have, and what is your pensionable salary? What is the level of employee contribution?

What is the likely level of employer contribution in the MP scheme?

I can't find any info on accrual rate. The normal retirement age is 65.

I have 18 years service, and the pensionable salary is currently £22011. I pay £137.81 per month, and my employer pays £257.25 per month.

My contribution is 7.5%.

I think the MP contribution is anywhere between 4.5% and 6.5%

MrChips

Thanks for the info - I forgot to ask your age also which will be relevant.

The accrual rate is the figure in your pension calculation, usually 60ths or 80ths. It's very important. Do you have your most recent benefit statement? What is your accrued pension to date?

Also how do you know what your employer pays into the final salary scheme?

parahandy

I'm 37 now.

I've looked back at my pension guide and it is 60ths.

I can't find my last statement, but in Oct 2007, my accrued pension was £4085.79

My employer pays £257.25 per month

MrChips

The pension of £4085.79 implies your salary back in Oct 2007 was about £15,300, right?

Where does the figure of £257.25 come from? In a final salary scheme, the employer contribution is variable and worked out as an average over all the members in the plan so it is unusual to see a specific "per member" contribution.

Shimrod

MrChips wrote: »

In a final salary scheme, the employer contribution is variable and worked out as an average over all the members in the plan so it is unusual to see a specific "per member" contribution.

The employer contribution into a final salary scheme is determined by actuaries and is set as a percentage of salary such that it will cover the future liabilities of the fund. On most payslips this percentage will be shown as the value paid by the company.*

With regard to the original question, based on your contribution you would have a much better pension staying with the final salary scheme rather than joining a money purchase scheme - if I've understood your question correctly, I certainly wouldn't give it up for a one-off payment of £11K.

*Or certainly has been at each of the companies I've worked for and had a final salary pension

markr007

With regard to the original question, based on your contribution you would have a much better pension staying with the final salary scheme rather than joining a money purchase scheme - if I've understood your question correctly, I certainly wouldn't give it up for a one-off payment of £11K.

But bear in mind that the Scheme may close at some point in any case - unless it's public/quasi public sector. This may be more likely as I think you are implying where the scheme has already closed to new members.

parahandy

markr007 wrote: »

But bear in mind that the Scheme may close at some point in any case - unless it's public/quasi public sector. This may be more likely as I think you are implying where the scheme has already closed to new members.

That is exactly what concerns me. They certainly have closed it to new members - so if I broke my service, I'd have to join a different type.

I don't really intend on still working in this job for much longer, in which case I'd be resigning, have to start a new pension and miss out on any tribunal award.

mark55man

parahandy wrote: »

That is exactly what concerns me. They certainly have closed it to new members - so if I broke my service, I'd have to join a different type.

I don't really intend on still working in this job for much longer, in which case I'd be resigning, have to start a new pension and miss out on any tribunal award.

Think you just answered the questions if you are thinking of running anyway then it makes sense to take the money and run