Pension - Mercer

ederj

Hello folks, new to the forum so... Hi...

Well, pension is the only thing in my life that I pay and don't fully understand, which makes me uncomfortable.

I have my pension with Mercer through my current employer. I currently pay at the 1/80th level (what ever this means)

Can anyone explain in simple terms or detailed, whatever is best how does pension actually works? does my employer also pays into my pension?

I don't fully understand how much I will be earning when retired or have a idea of it...I know the question is dumb but I would be grateful if you guys could help....


Thanks

jem16

ederj wrote: »

Hello folks, new to the forum so... Hi...

Well, pension is the only thing in my life that I pay and don't fully understand, which makes me uncomfortable.

I have my pension with Mercer through my current employer. I currently pay at the 1/80th level (what ever this means)

From that description you have a defined benefit pension which is based on number of years service and either final salary or career average.

Basically for each year you are receiving 1/80th of your entitlement. After 40 years service you are entitled to 40/80ths or 1/2 of your final salary. Similar idea for career average.

Do you know if it's final salary or career average? If you don't you should find out from the scheme booklet.

Can anyone explain in simple terms or detailed, whatever is best how does pension actually works? does my employer also pays into my pension?

With a defined benefit scheme it doesn't matter what your employer is paying as your pension is based on defined benefits as opposed to a money purchase scheme where the pot value matters.

I don't fully understand how much I will be earning when retired or have a idea of it...I know the question is dumb but I would be grateful if you guys could help....


Thanks

If it's final salary and you accrue 40 years service, it would be half of your final salary plus probably a lump sum.

ederj

Hello, it is final salary....I am currently earning 25k but will be on 30k within 4 years...

ederj

this is how they describe their scheme....

we provide our employees with a final salary pension scheme, which is often seen as the gold standard in pension provision. Running this scheme means our employees can plan for their retirement with confidence.

We will also provide protection for your family upon your retirement by providing pensions for your dependents and life assurance at four times your pensionable pay.

quotememiserable

ederj wrote: »

I have my pension with Mercer through my current employer. I currently pay at the 1/80th level

Mercer are an investment advisor, so your pension isn't 'with them', it actually with the company you work for. If you have a final salary 1/80th scheme that is still open you are one of the lucky few. Hang on to it. The real value of that is somewhere around 30% of salary.

dunstonh

mercer are administrators for pensions as well. They handle many schemes as administrator.

ederj

quotememiserable wrote: »

Mercer are an investment advisor, so your pension isn't 'with them', it actually with the company you work for. If you have a final salary 1/80th scheme that is still open you are one of the lucky few. Hang on to it. The real value of that is somewhere around 30% of salary.

Sorry if sounds stupid, but I didn't get what you mean...

quotememiserable

ederj wrote: »

Sorry if sounds stupid, but I didn't get what you mean...

Which part? I'm guessing the real value bit.

If you didn't have a final salary pension, and you wanted to set up a private pension scheme that would provide a similar level of benefits, you'd need to pay around 30% of you salary into it.

ederj

quotememiserable wrote: »

Which part? I'm guessing the real value bit.

If you didn't have a final salary pension, and you wanted to set up a private pension scheme that would provide a similar level of benefits, you'd need to pay around 30% of you salary into it.

So, if I pay 5% every month, when I get to 65 I will retire and will get half of my current salary per year?

But will I get a lump sum when I retire too?

Also, the fact that my company is paying in too, this is the other bit I don't get....

JoeCrystal

ederj wrote: »

So, if I pay 5% every month, when I get to 65 I will retire and will get half of my current salary per year?

But will I get a lump sum when I retire too?

Also, the fact that my company is paying in too, this is the other bit I don't get....

Do you have a scheme booklet you can get. It should contain all the information. Seriously, read it in order to gain full understanding of why it is so valuable.

There is a pot held by your company. Everyone pays into it, you and the company. However, because the company promised you a fixed amount of benefit, the company takes 100% risk of ensuring the pension. The lump sum can be gained by reducing the annual pension. So if there is not enough money in the pension fund, the company has to pay even more in! That is why you often see pension deficits reported in the newspapers about it.

So yes, if you work for 40 years, you will get half of the final salary.

To show why it is the gold standard, let take me for an example. In a vain attempt to get something similar, I decided to pay at 25% of my wages into the personal pension fund. According to my pension calculator, and if I am lucky to get 5% growth, it might reach 40% of the income. However, because it is invested in the stock market, the value goes up and down. So if I am merely unlucky, I might see my pension fund dropped like a stone, thus reducing my potential income massively.

But ultimately, I do not know what I will get.

However, company invest money like that but IF it does dropped like a stone, no worries for you, you will STILL get the defined amount of money because company will have to make up shortfall for you.

5% are extremely cheap. You are very lucky to have it!

EDIT: Oh by the way, there is also a life insurance for a payout of £100,000 or £120,000 as well, so... Yeah.

ederj

JoeCrystal wrote: »

Do you have a scheme booklet you can get. It should contain all the information. Seriously, read it in order to gain full understanding of why it is so valuable.

There is a pot held by your company. Everyone pays into it, you and the company. However, because the company promised you a fixed amount of benefit, the company takes 100% risk of ensuring the pension. The lump sum can be gained by reducing the annual pension. So if there is not enough money in the pension fund, the company has to pay even more in! That is why you often see pension deficits reported in the newspapers about it.

So yes, if you work for 40 years, you will get half of the final salary.

To show why it is the gold standard, let take me for an example. In a vain attempt to get something similar, I decided to pay at 25% of my wages into the personal pension fund. According to my pension calculator, and if I am lucky to get 5% growth, it might reach 40% of the income. However, because it is invested in the stock market, the value goes up and down. So if I am merely unlucky, I might see my pension fund dropped like a stone, thus reducing my potential income massively.

But ultimately, I do not know what I will get.

However, company invest money like that but IF it does dropped like a stone, no worries for you, you will STILL get the defined amount of money because company will have to make up shortfall for you.

5% are extremely cheap. You are very lucky to have it!

EDIT: Oh by the way, there is also a life insurance for a payout of £100,000 or £120,000 as well, so... Yeah.

I see, I will dig out for the booklet. But thank you everyone for the patience and for taking the time to explain it to me....very helpful community!