Transfering into a career average scheme

lizbete

Hi,

I am trying to decide whether to transfer a contribution based pension pot from my previous job into the USS career revalued scheme at my new job.

Transfer value of the previous scheme is ~£19,800, and USS have offered me a pension of £1130 / year. I am 32 and female. The USS pension is payable from age 65, includes a lump sum of 3x pensionable salary, will increase every year with CPI up to 5%, and includes ill heath / dependents benefits.

Is this a reasonable offer?

Apologies if I'm asking a question that has already been answered, I've had a search through forum posts and haven't found anything that seems to explain how I can work this out for myself - please point me at any posts I have missed.

Thanks!

Linton

I assume that the transfer will not affect your lump sum, so all you get from it is £1130/year upgraded by inflation.

Assume inflation of 2.5%....

In 33 years time the £1130 has risen to: £2553

Or you put the £19800 into a private pension and get 5% annual return. This is mildly pessimistic in my view which is fair enough for a retirement plan. In 33 years the £19800 has risen to £99063. With £99063 at 65 you could now buy an inflation linked pension of about £2900 with a 50% spouse pension assuming you are a non smoker. The figures could of course be different in 33 years time.

So on those assumptions the USS offer is not generous. On the other hand it is guaranteed which is definitely worth something. But of course the assumptions could be wildly wrong.

My conclusion is that taking everything into consideration the USS offer is just about fair. You could do better but this would mean taking some risk and you taking some time and effort to understand investing.

kidmugsy

"USS have offered me a pension of £1130 / year." Independent of your salary over then next 33 years?

xylophone

My inclination would be to go for USS but this could be because I'm accustomed to FS/CARE schemes.

Debt_Free_Chick

Linton wrote: »

Assume inflation of 2.5%....

In 33 years time the £1130 has risen to: £2553

Or you put the £19800 into a private pension and get 5% annual return. This is mildly pessimistic in my view

I wouldn't describe an annual return of double inflation to be "mildly pessimistic" over 33 years.

Linton

Debt_Free_Chick wrote: »

I wouldn't describe an annual return of double inflation to be "mildly pessimistic" over 33 years.

Its not double inflation, its 2.5% above inflation!! Any figure is a guess. If you look here at the Price Waterhouse report on investment returns for the FSA you will see they are typically talking about long term averages of about 5% real return, ie above inflation. So my 2.5% in that context is mildly pessimistic.