what is a final pension salary worth

Mr_Incredible

atush wrote: »

30+% as many come with Death in Service Benefits and others (incl a guaranteed min spousal pension)

Yes mine does, thank you for yoru estimate

atush

But of course, if you didn't have a spouse or dependants- these items wouldn't/might not be on your shopping list to replace.

Mr_Incredible

atush wrote: »

But of course, if you didn't have a spouse or dependants- these items wouldn't/might not be on your shopping list to replace.

fair point but in my case I do and I guess most people want a partner and maybe kids in the future if they haven't already

Debt_Free_Chick

It's impossible to say. The cost is the total of the pension instalments paid out to you - and on your death, to your dependents. The contributions paid by the employer are simply savings, towards the pension instalments they will pay to you as a pension.

Having said that, I agree that the value to you is around 25% of your salary.

Mr_Incredible

well i heard on the news that the FSA is requiring pension funds to down value annuity expectations by circa 40% for regular pensions. I guess by contrast the guaranteed pension of a final salary pension just got even more valuable!

kidmugsy

Mr_Incredible wrote: »

well i heard on the news that the FSA is requiring pension funds to down value annuity expectations by circa 40% for regular pensions. I guess by contrast the guaranteed pension of a final salary pension just got even more valuable!

No, it hasn't got more valuable in the least. But how valuable it is has just got much more conspicuous. In particular, I'd guess that the expense of public sector final salary pensions has just become even more conspicuous.

dunstonh

Mr_Incredible wrote: »

well i heard on the news that the FSA is requiring pension funds to down value annuity expectations by circa 40% for regular pensions. I guess by contrast the guaranteed pension of a final salary pension just got even more valuable!

The media is reporting it like that but it is not the case. It is also nothing to do with annuities. It is the annual average return examples.

Every few years the regulator reviews example projection rates and sets the maximum that can be used (until the next review). The review prior to this one told providers to use lower than maximum figures where the investment utilised assets which were not likely to be able to achieve the middle growth rate example of 7%. However, the FSA left it at 7% as a maximum. Most pension providers lowered their projections from 7% to reflect the asset class. Some went lower than 5%. A mixed asset fund would frequently be projected at around 5% p.a. It was really only 100% equity funds that still did 7%.

Today's media frenzy is bad reporting as the FSA has not changed it's position on projections based on the potential of the fund. It has just lowered the maximum from 7% to 5%. A company already using 5% (which is by far the most common rate used before today) is still going to be using 5%.

The other thing is that these are just example figures. No-one's pension is going to be lower because of changes in the example rates. It also affects all investment products. Not just pensions. Some of the reporting I have seen on this has been absolutely disgraceful with the headlines running that you will get 40% less in your pension. I am just waiting for the MSE scaremongering post that will no doubt appear some time today.

bilbo51

Mr_Incredible wrote: »

well i heard on the news that the FSA is requiring pension funds to down value annuity expectations by circa 40% for regular pensions. I guess by contrast the guaranteed pension of a final salary pension just got even more valuable!

It isn't annuity expectations that are being downgraded - it's just the projected rates of return which the FSA mandates should be used on illustrations.

Mr_Incredible

bilbo51 wrote: »

It isn't annuity expectations that are being downgraded - it's just the projected rates of return which the FSA mandates should be used on illustrations.

It signals a downgrading of performance expectation, no?

Mr_Incredible

dunstonh wrote: »

The media is reporting it like that but it is not the case. It is also nothing to do with annuities. It is the annual average return examples.

Every few years the regulator reviews example projection rates and sets the maximum that can be used (until the next review). The review prior to this one told providers to use lower than maximum figures where the investment utilised assets which were not likely to be able to achieve the middle growth rate example of 7%. However, the FSA left it at 7% as a maximum. Most pension providers lowered their projections from 7% to reflect the asset class. Some went lower than 5%. A mixed asset fund would frequently be projected at around 5% p.a. It was really only 100% equity funds that still did 7%.

Today's media frenzy is bad reporting as the FSA has not changed it's position on projections based on the potential of the fund. It has just lowered the maximum from 7% to 5%. A company already using 5% (which is by far the most common rate used before today) is still going to be using 5%.

The other thing is that these are just example figures. No-one's pension is going to be lower because of changes in the example rates. It also affects all investment products. Not just pensions. Some of the reporting I have seen on this has been absolutely disgraceful with the headlines running that you will get 40% less in your pension. I am just waiting for the MSE scaremongering post that will no doubt appear some time today.

Well explained as always