Private sector pension contribution rates

Jumex

Hey - hopefully this is the right forum...

So I've been offered a new job in the private sector and wonder if the pension rates I'm offered the norm.

Bit of background (skip if you want). I'm currently on ~£40k in the public sector, looking to move to a new job on around ~£45k. The non pay benefits are less in the private sector, holiday 29 days v 25 days.

My current pension contribution rates are:

Employee 6.7%
Employer 14%

New Job

First 2 years:
Employee 2%
Employer 6%

After 2 years:
Employee 4%
Employer 8%

So my total pension contributions would take a bit of a hit.

Are these rates fairly normal for private sector companies?

I'm only 26 and have been paying into a pension for 5 years, but I'm a long way from retirement so I'm not overly concerned right now, but I'd like to still build up a good pot.

I have access to a low annual management charge pension from a private pension firm (I used to work in their call centre years ago and you retain good terms as an ex employee). I can use this to top up more into my pension if needed.

Bottom line - are the rates competitive? And do I need to worry?

warwicktiger

The current rates are very generous and the new job rates generous, far more common are 3+3 or 5+5% employee/er contributions.

Do you need to worry, well without a crystal ball I cannot tell you what kind of pension either would provide compared to your final salary, but based on the last 20-40 years you would need a total rate of around 20-24%% to provide a pension likely to match the current gold plated public sector final salary schemes!

Jumex

warwicktiger wrote: »

The current rates are very generous and the new job rates generous, far more common are 3+3 or 5+5% employee/er contributions.

Do you need to worry, well without a crystal ball I cannot tell you what kind of pension either would provide compared to your final salary, but based on the last 20-40 years you would need a total rate of around 20-24%% to provide a pension likely to match the current gold plated public sector final salary schemes!

Cheers for the prompt reply.

My public sector pension is not final salary. It is however reassuring to know that the private sector rates offered are somewhat in line with the rest of the market.

CLAPTON

basically you are taking a pay cut

jem16

Jumex wrote: »

Hey - hopefully this is the right forum...

So I've been offered a new job in the private sector and wonder if the pension rates I'm offered the norm.

Bit of background (skip if you want). I'm currently on ~£40k in the public sector, looking to move to a new job on around ~£45k. The non pay benefits are less in the private sector, holiday 29 days v 25 days.

My current pension contribution rates are:

Employee 6.7%
Employer 14%

As a member of a public sector defined benefit scheme (ie final salary scheme), it doesn't matter what your employer is paying. Your benefits are worked out on a number of years service and a final salary with no investment risk to you.

New Job

First 2 years:
Employee 2%
Employer 6%

After 2 years:
Employee 4%
Employer 8%

So my total pension contributions would take a bit of a hit.

Are these rates fairly normal for private sector companies?

Fairly normal yes - perhaps even better than some. However the main difference is that it is likely to be a defined contribution scheme where all the investment risk is on you and what you end up with depends on how your pension has performed.

warwicktiger

Jumex wrote: »

Cheers for the prompt reply.

My public sector pension is not final salary. It is however reassuring to know that the private sector rates offered are somewhat in line with the rest of the market.

No, not in line, far better than most!!

jem16

Jumex wrote: »

My public sector pension is not final salary.

So what is it? Career average?

Jumex

jem16 wrote: »

So what is it? Career average?

Yup.

Although its a great scheme. The job nor sector is where I want to work long term.

@CLAPTON

Yes, the total 'package' is less. But I shouldn't solely stay in a job for pension benefits. I just wanted to ensure that the new rates are close to the norm.

jem16

Jumex wrote: »

Yup.

Although its a great scheme.

And still defined benefit so no risk to you.

Camdoon

I would go back to company and state that you are keen on the job but the pension allowance mean you are taking a pay cut.
At least you could argue for the higher rate from day 1.

kidmugsy

Jumex wrote: »

My current pension contribution rates are:

Employee 6.7%
Employer 14%

Since it's a defined benefit scheme the employer's contribution is essentially nominal, since in the end the employer must stump up whatever is required to ensure that your pension is paid. So that 14% could really be 18%, 20% .... or if antibiotic-resistant bacteria have their wicked way with us, 10% or 8%.