What % contribution is normal?

spock007

I just commented on a thread where I was surprised to see an NHS employee getting 14% pension contribution - wow! It got me thinking, what is a normal contribution? An old employer of mine paid 10% and I thought that was stellar. I now have a new job which pays just 4.5%. I love the job and wouldn't move, but I think that 4.5% is a bit on the low side? Compare to this:

http://www.moneyobserver.com/news/13-04-24/are-you-getting-most-out-your-pension

6.6% is meant to be the average? Anybody care to comment or even share how much contribution they get? My advisor says this is a decent amount but I'm starting to doubt that...

hugheskevi

A smorgasbord of very interesting but terribly presented pension stats showing distribution of employer contributions can be found in the Annual Survey of Hours and Earnings Pension tables, and in particular this one.

That shows that 10.6% of private sector employees who were a member of their employer's pension received an employer contribution in excess of 20%. That compares to 15.5% in the public sector.

41.2% of private sector employees who were a member of their employer's scheme received a contribution of at least 10%. That compares to 95% in the public sector.

Mind you, only 32% of employees were actually members of an employer's scheme in the private sector, whereas 83% are members in the public sector. Combining the figures, 46% of employees are members of a workplace pension, which sadly means that the most common employer contribution is nil.

dunstonh

I just commented on a thread where I was surprised to see an NHS employee getting 14% pension contribution

They are not getting a 14% contribution. That isnt how the NHS pension works. It is a selection of defined benefits.

Defined benefit schemes are funded by the employer and employee. They need to have enough money to fund the liabilities (the people drawing their pension and those to draw them in future being the main one). So, the employee pays an amount into it and the employer pays an amount that can range from zero upwards depending on the cost of providing those liabilities. It is not the same as a defined contribution plan where the employer pays a percentage directly into your pension and that money becomes yours.

JoeCrystal

hugheskevi wrote: »

Mind you, only 32% of employees were actually members of an employer's scheme in the private sector, whereas 83% are members in the public sector. Combining the figures, 46% of employees are members of a workplace pension, which sadly means that the most common employer contribution is nil.

However, that is due to change with auto-enrollment, eventually rising to 3% in 2017. I am hoping that over the next decade or so, the employer's contribution will go up to a more reasonable level.

Cheers,
Joe

System

You could look at it in broad terms.
If you are going to work for 40 years and perhaps expect to be retired for 20 years, then you need to save 50% of your earnings.
To the extent that you manage to make your pension pot grow in real terms, then you could get by with a lower level of saving.
Or if you were willing to halve your standard of living on retirement, then a 25% saving rate would be enough.

spock007

Dunston, that's what I meant... employer puts up 14% as a defined benefit. Sorry for my terminology. Hugh's reply was an eye-opener - seems my company's "contribution" (Sorry, Dunston!) is really small - should I be worried!?!?

I found another thread on this forum about retiring early - will have to look into that one...