private or public package

dolcelatte

I am 50 years old and haven't paid into a pension scheme at all for 14 years. I have an index linked pension from a bank that I paid into for 15 years previoously. Now I am about to change jobs and have been offered an NHS position and a private sector job that pays 20% more than the NHS job. My dilemma: which offers the better value financially taking account of the generous NHS pension scheme?

CLAPTON

what does the private sector job offer in terms of pension?

LongTermLurker

I wouldn't be choosing my next career move based on pension offering alone?! Which job do you think is the most interesting and which will you enjoy doing for the next 15 years or so?

If it did come down to money (and it does partly), I would be more interested in a 20% salary increase than I would having 15/60 (or whatever) of an already low final salary.

dunstonh

NHS pension and benefits would cost around 15-25% of your income to replace in the private sector (its variable as age and amounts can come into play as well as what version of the NHS pension you are in or if you are in a protected age role).

So, if the new employer pays say 10% i

LongTermLurker

dunstonh wrote: »

So, if the new employer pays say 10% i

Is this a game of "finish the sentence"?

That's a big benefit, I must admit, but I'd still always be worried about the longevity of the position, especially with government cutbacks being thrown around.

dunstonh

I dont know where the rest of it went. Cant remember what i was going to say either.

dolcelatte

CLAPTON wrote: »

what does the private sector job offer in terms of pension?

The pay 50% of my contribution up to max 4% of salary.

LongTermLurker

So to get 4%, you have to contribute 8%? That's not a great offer, in fact it's p*ss poor. Most private schemes match you up to a limit. However, it's obviously free cash.

It's sounding like the NHS job would give the best pension options (until the government changes it?) but I still say there's more to working life than pensions - I'd much rather feel happy and confident in my job. Not saying you won't get that in the NHS, I'm just saying that for me, the days of a company offering an enticing pension package are long gone - for one thing, I work in an industry where I don't expect to stay in one job (through choice) more than 5 - 10 years, and 10 years is an extremely long time.

dolcelatte

The wording is "the company operates a pension scheme whereby we contribute 50% of your own contribution up to a maximum of 4% of your salary to any private pension scheme you have in place". Is that a poor deal? I have no idea about private pensions.

LongTermLurker

to any private pension scheme you have in place

That suggests they may not actually offer a pension scheme of their own? In your case, having not contributed for 14 years, your existing pension would be paid up. Therefore, it sounds like you might have to do your own research and start a pension under your own steam. While that could be a very good thing as it allows you to choose exactly what you want, it does require some work on your part to get it right.

The proportions they're offering aren't great. Normally, as I say, if you pay 5%, your company pays 5% - here, if you pay 5%, they will only pay 2.5% (i.e. 50% of your contribution; if you pay 10%, they pay only 4% - their contribution being capped at 4%). It's not much of an enticement.

On the other hand, you get 20% more salary every year - while the private sector job may not give you a payrise each year, the NHS isn't likely to lead the way in pay increases either!

Loughton_Monkey

dunstonh wrote: »

NHS pension and benefits would cost around 15-25% of your income to replace in the private sector (its variable as age and amounts can come into play as well as what version of the NHS pension you are in or if you are in a protected age role).

Look at the extreme of a 64 year year old working 1 year and then retiring. If (as I assume) this is a 60th's final salary scheme, then a salary of £30,000 would attract a pension of exactly £500 per year.

The "raw" annuity rate for a 65 year old male is 6.5% - meaning that a fund of exactly £7,692 would be required. Given, however, the partial index linking, the widows pension, then the cost would almost certainly be nearer £10K, or 33% of salary.

So on this basis, at age 50, I would suggest that if you took the private job, and shoved the whole 20% extra into the pension pot (plus 4% from the employer) you might just scrape the same fund together by the time you retire.

Hence, as others suggest, maybe you should take whichever job appeals to you most as a job/career.

Your biggest mistake, possibly, would take the private job, and bung in only the 'minimum' 8% (your 4% plus employer's 4%). This is because the extra cash will be spnet more on your lifestyle, while your pension pot will be only marginally increased. Your drop in lifestyle upon retirement will be much bigger.