Final Salary Pension Closing

Southend1

kidmugsy wrote: »

That's an awfully affected way of saying "Give me your money".

Sorry I don't get what you mean?

atush

Why so coy now?

header

Employers generally benchmark their pay & benefits against their peer-group. What sector do you work in? In banking, expect an employer contribution of c10%; in retail, halve that (or even less)

I work for a "high-tech engineering" firm. When the DB scheme closes, the company will pay 8% into the existing DC scheme and employees pay 6%. There is a transition period when the employer puts in 4% additional for 4 years. The DC scheme has been up and running for a number of years - so I doubt the company will change that. But is the 4% for 4 years transitional contribution a reasonable sweetner for replacing the DB scheme?

transitional contributions which are higher than the norm are usually targetted towards those closest to retirement. The reason being that they have less time (to retirement) in which to absorb the change in strategy.

I don't get this. In our scheme, at least, the employees who are closest to retirement have already maxed out their DB contributions (2/3) and so the company contribution to the DC scheme is more like the company paying into an extra savings plan that will be on top of their maxed out pension when they retire. It is the employees with the longest before retirement who are loosing the most.

NotSkint

header wrote: »

I don't get this. In our scheme, at least, the employees who are closest to retirement have already maxed out their DB contributions (2/3) and so the company contribution to the DC scheme is more like the company paying into an extra savings plan that will be on top of their maxed out pension when they retire. It is the employees with the longest before retirement who are loosing the most.

You are equating age with time in DB scheme. This isn't always the case. Say for example someone was employed at 50, is now 58 and your company retirement age is 65. He/she will have 8 years in the scheme and not be maxed out. 7 years of DC contributions, when you would possibly be moving into lower risk investments and away from equities doesn't give much opportunity to play catch up to the loss of the DB scheme.
On the other hand those that are much younger have much more time to invest and ride out any ups and downs for a potentially better return. Also the further away from retirement you are the more opportunity you have to adjust your plans to get to the retirement goal you wish to achieve.