Company Pension Info (transfering for Final Salary Pension)

lightspeed

Hi

In regards to a recent post (partner working for NHS with FSP but going for a new job with higher income & higher potential income but standard company pension) i am just after some brief info:

She has now got the job and must therefore leave her FSP - she can pay in to the new company pension upto 9% of her income and they will match it.

1) What happens to the contributions already made to the FSP?

She is 25yo and has worked for the NHS for 5yrs.

2) Do company pensions work in a similar way i.e. provide a monthly amount once retired and a lump sum albeit not as much as a FSP or do they work differently?

3) I am right in thinking that a contribution of 7% (approx £76pm on a 21k salary) would be doubled to £152 (as a result of the company contribution) - any ideas on how this can be used to estimate an end pension fund after 35years?

thanks

CLAPTON

she exisitng contributions into the FS scheme will provide a pension at the normal retirement age based on her final salary and years of service
this will be index linked until she takes the pension


her new scheme will provide a pension pot when she retires which is based on the money paid in and the performance of the funds that the money is invested in (i.e. basically depends upn the stockmarket)
on retirement she can take 25% tax free from the pot and then buy an annuity to meet her requirements (flat, indexed linked, joint etc )
or she can draw down from the pot according to the rules (which will be different by the time she retires)

jem16

lightspeed wrote: »

1) What happens to the contributions already made to the FSP?

She is 25yo and has worked for the NHS for 5yrs.

It will become a deferred pension rising in line with inflation until the NRA - 60/65.

2) Do company pensions work in a similar way i.e. provide a monthly amount once retired and a lump sum albeit not as much as a FSP or do they work differently?

They do provide a lump sum and monthly pension.

However the FSP has no investment risk to you. The new pension will go up/down in line with the investments within the pension.

3) I am right in thinking that a contribution of 7% (approx £76pm on a 21k salary) would be doubled to £152 (as a result of the company contribution)

Yes - plus tax relief at 20% on the £76. So gross payment would be £95 plus the employer's contribution of £76.

- any ideas on how this can be used to estimate an end pension fund after 35years?

thanks

I'll leave that to someone else.

markr007

- any ideas on how this can be used to estimate an end pension fund after 35years?

Very broadly multiply the money going in each year by, the number of years contributing, (1+Assumed investment growth) to the power of half the period and (1+Assumed Salary Growth) to the power of half the period.

For example on FSA statutory illustration assumptions the fund is likely to be:

(95+76) x 12 months per year x 35 years x 1.07^(35/2) x 1.025^(35/2) = £362,000

Or in today's prices: £152,000

This might buy an index linked pension with a 50% pension payable on death to a spouse of £5000 a year from 60 (again in today's prices and based on FSA statutory illustration assumptions) (without index linking it will be more like 8,000 pa)

sussexslanter

I'm in a similar position - having stopped working for the NHS after six years. My final salary was not that high and I have no intent to return.

I am now in the educational sector which has its own pension scheme.

Given that I am now 37...is it wise to leave the NHS pension contribution alone or is it possible to amalgamate it with my current new Teacher pension?

Loughton_Monkey

lightspeed wrote: »

3) I am right in thinking that a contribution of 7% (approx £76pm on a 21k salary) would be doubled to £152 (as a result of the company contribution) - any ideas on how this can be used to estimate an end pension fund after 35years?

On a £21K salary, that's £1,750 a month, of which 7% is £122.50

I assume deduction is the 'net' figure, so to achieve £122.50 only costs her £98 per month. So £98 per month actually becomes £245 a month 'gross' going into the pension.