URGENT pension decision

cluelesswithmoney

Hi

I have to decide TODAY (I know....the e-mails about this got diverted to a junk folder and I've only just found them) about which pension to join with my employer. These are:

Option 1.
Personal pension scheme with the employer. I would contribute 7% and the employer 11%. i.e. defined contribution.

Option 2.
A final salary scheme. Again I would contribute 7%. i.e a defined benefit scheme.

I have NO idea which would be better for me. I don't expect a massive final salary but it's not bad. I'm also unsure about whether I'd stay with this company until retirement - but I might.

Is there any easy way to decide? Does it make that much difference in the long run?

Any (RAPID!) advice would be very welcome!

Thanks

cluelesswithmoney

Lokolo

What are the terms of the FSP? Is it 1/60th? 1/80th?

cluelesswithmoney

Thanks. It's 1/60th

warwicktiger

Personally final salary every time, because of the guaranteed benefits. The older you are the more this becomes a consideration

warwicktiger

Just seen 1/60th. This would cost you a lot lot more than 7% of salary to provide with money purchase. Your 7% will only cost you 5.6% because of tax relief.

Lokolo

Then personally I would go for FSP.

cluelesswithmoney

Thanks. That's useful. I've also just worked out the expected costs of each and the final salary scheme is significantly lower.

If it makes any difference, I'm 47 but have missed out on quite a few years pension contribution for various reasons. So I'd need something that maximises what I would get given the relatively short time I've got left to contribute.

somethingcorporate

I'd go for the final salary too - that sounds very good.

Sure it is final salary and not career average?

If it definitely is a 1/60ths final salary scheme grab it with both hands and hold on tight. The DC one would likely not come anywhere near it!

cluelesswithmoney

That's brilliant! Thanks to all of you. I've done the internet-age equivalent of signing on the dotted line and have clicked the 'Accept' button.

You've saved me a lot of anguish. This is really helpful.

jamesd

Your age tends to reinforce the preference for final salary. Less time for investment growth in a defined benefit scheme to help you.

Looks as though you went for the way that's most likely to leave you as well off as practical.

You do still have a lot of time to work on improving your retirement income prospects in other ways as well, if that's desirable. Depends on what income you have lined up already and what you'll need. its' definitely not too late to greatly improve your situation.