final salary pension contributions

WaxiesDargle

can someone tell me why some public sector workers pay 11% and some 6% or lower in a final salary pension scheme

what are the benefits in paying the higher figure...is it earlier retirement age?

cheers

Andy_L

11% ish is the police/fire schemes which are better than the others. Earlier retirement age whilst accumulating the same %age of final salary as a pension

bigfreddiel

WaxiesDargle wrote: »

can someone tell me why some public sector workers pay 11% and some 6% or lower in a final salary pension scheme

what are the benefits in paying the higher figure...is it earlier retirement age?

cheers

some are a 1/80th scheme others are a 1/60th scheme

what does that mean i hear you ask?

well a 1/80th scheme means for every year you work you get 1/80th ofyour final salary - work for 40 years you get 40/80ths i.e. half of your final salary is your pension and so on.

following so far,,,,,,,, good, well i'm sure you see whats coming...

a 1/60th scheme means you get 1/60th of your final salary as your pension, so to get half your salary in this scheme you only need to work for 30 years - so obviously it costs more - but you would be paying more for a shorter time - in this example 10 years less.

so which is better - well i guess a bit of spreadsheet analysis is required.

hope that helps


and btw, the classic civil service scheme is a 1/80th, not too bad and in addition you get a lump sum of 3x your pension so in my example say you where on £30k when you retired, your pension is £15k and a lump sumof £45k - not too bad for a 1 1/2% contribution in this scheme

somethingcorporate

A good little guide here to the public sector pensions:

http://www.bbc.co.uk/news/business-10912958

dzug1

bigfreddiel wrote: »

some are a 1/80th scheme others are a 1/60th scheme

what does that mean i hear you ask?

well a 1/80th scheme means for every year you work you get 1/80th ofyour final salary - work for 40 years you get 40/80ths i.e. half of your final salary is your pension and so on.

following so far,,,,,,,, good, well i'm sure you see whats coming...

a 1/60th scheme means you get 1/60th of your final salary as your pension, so to get half your salary in this scheme you only need to work for 30 years - so obviously it costs more - but you would be paying more for a shorter time - in this example 10 years less.

so which is better - well i guess a bit of spreadsheet analysis is required.

hope that helps


and btw, the classic civil service scheme is a 1/80th, not too bad and in addition you get a lump sum of 3x your pension so in my example say you where on £30k when you retired, your pension is £15k and a lump sumof £45k - not too bad for a 1 1/2% contribution in this scheme

BUT 1/80th schemes tend to come with a built in lump sum on top of the pension. With 1/60th ones, to get a lump sum you have to give up some of that pension. Whilst the arithmetic almost certainly doesn't exactly pan out, in theory they are identical for the same combination of salary/lump sum.

The 1.5% in the classic scheme is in fact in repect of a basic widows pension. The actual pension is non-contributory - or rather the contribution takes the form of a lower salary than would otherwise be paid

Loughton_Monkey

WaxiesDargle wrote: »

can someone tell me why some public sector workers pay 11% and some 6% or lower in a final salary pension scheme

what are the benefits in paying the higher figure...is it earlier retirement age?

cheers

It's simply because public sector employees do not have one 'employer'. There are umpteen different arrangements. Same for pay scales, redundancy agreements, sick pay arrangements, grievance procedures......

So same as asking why do Tesco employees have a different pension scheme from employees at British Aerospace....

WaxiesDargle

thanks all for your replies...much appreciated

WaxiesDargle

bigfreddiel wrote: »

some are a 1/80th scheme others are a 1/60th scheme

what does that mean i hear you ask?

well a 1/80th scheme means for every year you work you get 1/80th ofyour final salary - work for 40 years you get 40/80ths i.e. half of your final salary is your pension and so on.

following so far,,,,,,,, good, well i'm sure you see whats coming...

a 1/60th scheme means you get 1/60th of your final salary as your pension, so to get half your salary in this scheme you only need to work for 30 years - so obviously it costs more - but you would be paying more for a shorter time - in this example 10 years less.

so which is better - well i guess a bit of spreadsheet analysis is required.

hope that helps


and btw, the classic civil service scheme is a 1/80th, not too bad and in addition you get a lump sum of 3x your pension so in my example say you where on £30k when you retired, your pension is £15k and a lump sumof £45k - not too bad for a 1 1/2% contribution in this scheme

thanks bigfred it does help

but the police/fire service who pay 11% get 3 x final salary...so in your example if they were on 30k then they would get 90k lump sum (if they commuted the max)

bigfreddiel

dzug1 wrote: »

BUT 1/80th schemes tend to come with a built in lump sum on top of the pension. With 1/60th ones, to get a lump sum you have to give up some of that pension. Whilst the arithmetic almost certainly doesn't exactly pan out, in theory they are identical for the same combination of salary/lump sum.

The 1.5% in the classic scheme is in fact in repect of a basic widows pension. The actual pension is non-contributory - or rather the contribution takes the form of a lower salary than would otherwise be paid

yep i forgot to mention the 1/60th has no lump sum unless you commute,and the 1 1/2% is indeed the basic widows pension - if you're single it can be claimed back - great innit!