Pension - Mercer

quotememiserable

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....

The company pays in because the contribution you make is nowhere near enough to cover the benefits they are providing. But they gaurantee the outcome, not the amount they pay in, its up to them to pay enough to provide the benefit. How much that is depends on investment rates, inflation rate, when you retire, what your final salary is etc.

Normally a 1/80ths scheme works like this. If you retire with 40 years service you get 40/80th or 1/2 salary as an annual pension (and you'd get the state pension too, of course). Plus normally they also pay 3/80ths once only in cash. So if you've done 40 years this would be 120/80ths or 1.5x salary as a lump sum, which is tax-free. All this would make you one of the wealthiest pensioners around. Which is why I say its very valuable and hang on to it if at all possible.
As others have said, you need to check the rules specific to your scheme to be sure.