Pensions - Where to Start

ManicRower

Good Afternoon,


Apologies if this thread asks some basic questions, but I'm not sure where to start when it comes to pensions. Here's a little bit of background:


I am 25 years old, worked in the public sector for 4 years and was enrolled in the Nuvos pension scheme for all 4 years. I left the public sector in July 2013 and since then I have changed jobs and bought a house.


Things have now settled down with house buying and I have become eligible for the pension scheme at the company where I work. I would like some clarification about where I stand and what my options are:


- Is it safe to assume my public sector pension just stays in a pot until I reach retirement age? If I rejoined the public sector could I add to it?
- With regards to looking forward, the company I am currently with offer a 10% pension scheme (i.e. I put in £100 and they put in £10) which seems pathetic to me. Do I have unrealistic expectations coming from the public sector? Or are there better options out there?
- If there are alternatives to the company scheme mentioned above, how do I compare them? What am I looking for?


I am relatively good with money/saving and understand mortgages/interest rates/basic economics, but I have never looked into pensions before and am a complete newbie. If somebody could perhaps point me in the right direction, I'd very much appreciate it.


Many Thanks,

Nick_C

ManicRower wrote: »

- Is it safe to assume my public sector pension just stays in a pot until I reach retirement age?

- Yes, and it is index linked to inflation.

ManicRower wrote: »

If I rejoined the public sector could I add to it?

- probably, although who knows what will happen in future.

ManicRower wrote: »

- With regards to looking forward, the company I am currently with offer a 10% pension scheme (i.e. I put in £100 and they put in £10) which seems pathetic to me. Do I have unrealistic expectations coming from the public sector? Or are there better options out there?
- If there are alternatives to the company scheme mentioned above, how do I compare them? What am I looking for?

- your new employer is less than generous, but if they are adding anything at all to your contributions then it is probably worth taking. The alternative is to make your own pension arrangements with a private company, or through a SIPP (Self Invested Pension Plan). You should look at administration costs, and how your benefits are calculated.

gadgetmind

ManicRower wrote: »

the company I am currently with offer a 10% pension scheme (i.e. I put in £100 and they put in £10) which seems pathetic to me.

Do you have it in writing that this is how it works?

Do I have unrealistic expectations coming from the public sector?

Without a doubt.

atush

Normally I would expect them to match to a certain %, such as you put in 8%, they put in 8%. But 10% is better than nothing, and would be raised if you put in more than 10%?

If you want to put in more than 10%, then they would at least add something to yours. So think of it like this, for every 80 you put in, the govt will add 20 and your company 8. So for every 80 paid into a pension, you'll get 108. so if you can put in 160, you'll get 216?

FatherAbraham

ManicRower wrote: »

Is it safe to assume my public sector pension just stays in a pot until I reach retirement age?

Since that's a defined-benefit pension scheme, there isn't a "pot", that concept belongs to money-purchase or defined-contribution pension schemes. What you have acquired are rights to an income in the future.

ManicRower wrote: »

With regards to looking forward, the company I am currently with offer a 10% pension scheme (i.e. I put in £100 and they put in £10) which seems pathetic to me.

Are you absolutely sure that this is how the employer contribution works? It sounds amazingly low.

ManicRower wrote: »

Do I have unrealistic expectations coming from the public sector? Or are there better options out there?

AFAICS, at least 90% of people working in the public sector have no idea of how enormous their pensions are, compared to what the general labour market offers.

ManicRower wrote: »

If there are alternatives to the company scheme mentioned above, how do I compare them? What am I looking for?

There are no alternatives, because you're looking at employer contributions, not the pension plan itself. The only way to change the employer contribution level is to change employers.

ManicRower wrote: »

I am relatively good with money/saving and understand mortgages/interest rates/basic economics, but I have never looked into pensions before and am a complete newbie. If somebody could perhaps point me in the right direction, I'd very much appreciate it.

Welcome to the real world, where you'll need to pay 25%-30% of your pay into a personal pension if you want to get a reasonable fraction of what public-sector workers get. You'll eventually find that your old friends in the public sector are able to spend so much more than you, because they'll have so much more disposable income, yet their future is far less precarious than yours is. You will look on with amazement when you hear them complaining how hard life is, when you look at your own financial position. Eventually you will find yourself avoiding them socially, because of your inability to talk to them without breaking into inchoate rage about how overpaid yet oblivious to it they are.

Warmest regards,
FA

alongtimetogoyet

Welcome to the real world, where you'll need to pay 25%-30% of your pay into a personal pension if you want to get a reasonable fraction of what public-sector workers get. You'll eventually find that your old friends in the public sector are able to spend so much more than you, because they'll have so much more disposable income, yet their future is far less precarious than yours is. You will look on with amazement when you hear them complaining how hard life is, when you look at your own financial position. Eventually you will find yourself avoiding them socially, because of your inability to talk to them without breaking into inchoate rage about how overpaid yet oblivious to it they are.


As a public sector worker for 25 years I find these comments interesting. Yes the pension scheme is generous but we arent forced into it. Many of these workers are low paid and like many others have had a 1% pay rise in total over the last 4 years whilst living costs have risen well in excess of this. The government's cuts, have led to many losing their jobs and this is set to continue for many more years until all the libraries, leisure centres, care homes etc are closed. We will continue to receive lower than inflation pay rises whilst bonuses are paid out in other sectors. Everyone has a right to moan about hard life is to them, thats human nature.
Your talk of social avoidance and people being overpaid is very limited and narrow. My role pays approx 10k more in the private sector however I make my choice, as do you, however I dont criticise.
Perhaps in future you may want to consider a more balanced opinion rather than your one sided claptrap.

gadgetmind

alongtimetogoyet wrote: »

Many of these workers are low paid and like many others have had a 1% pay rise in total over the last 4 years whilst living costs have risen well in excess of this.

Again, welcome to the real world. Average salaries are still much higher in the public sector than the private even before pensions are included. Oh, and "sick" days are also much higher in the public sector.

I don't blame public sector employees themselves as the current mess is simply the result of weak negotiation over many decades that will take a long time to unwind.

kidmugsy

If this is going to descend into a stishie about people over-rewarded by govt, may I please put in a special plea for the Blair govt's hopelessly daft gifts of taxpayers' money to the GPs? To pay them more for delivering much less was sublimely stupid.

bigadaj

alongtimetogoyet wrote: »

As a public sector worker for 25 years I find these comments interesting. Yes the pension scheme is generous but we arent forced into it. Many of these workers are low paid and like many others have had a 1% pay rise in total over the last 4 years whilst living costs have risen well in excess of this. The government's cuts, have led to many losing their jobs and this is set to continue for many more years until all the libraries, leisure centres, care homes etc are closed. We will continue to receive lower than inflation pay rises whilst bonuses are paid out in other sectors. Everyone has a right to moan about hard life is to them, thats human nature.
Your talk of social avoidance and people being overpaid is very limited and narrow. My role pays approx 10k more in the private sector however I make my choice, as do you, however I dont criticise.
Perhaps in future you may want to consider a more balanced opinion rather than your one sided claptrap.

Whilst not wanting to get into a spat what has actually happened is that many of the lower paid jobs have been privatised and outsourced. So such people have suffered from the removal of many benefits whereas they have been retained by higher paid public sector staff.

Most of the private sector have had little in pay rises in the last five or six years, and I'm talking about absolute pay rises, not in real terms, so pay cuts in real terms.

I've been job searching for the last couple of months and whilst the majority of roles in my area of expertise are private sector there are some public sector ones I've applied for. Ignoring the huge pensions benefits the few roles I've applied for in the public sector have offered salaries around 10-20% higher than equivalents in the private sector. I'm just upset I've not been offered one as yet!

Nick_C

FatherAbraham wrote: »

Since that's a defined-benefit pension scheme, there isn't a "pot", that concept belongs to money-purchase or defined-contribution pension schemes. What you have acquired are rights to an income in the future.

That's just semantics. You have paid into a pension scheme and accrued something of value. Call it a treasure chest if it makes FA happy. If you wanted to transfer your Nuvos pension to a different scheme, they would give you a valuation and transfer the cash to a new provider if you wanted them to. (I'm not suggesting that you do this!!)

AFAICS, at least 90% of people working in the public sector have no idea of how enormous their pensions are, compared to what the general labour market offers.

From my experience of working in the public sector, I would say at least 90% of them realise what a valuable asset a public sector pension is. That's why most of my colleagues recently endured a 4 year pay freeze - a 15% pay cut in real terms - instead of moving to the private sector. And its why when we privatised one of our services, the biggest concern of the staff was that their new employer would continue to offer the LGPS.

There are no alternatives, because you're looking at employer contributions, not the pension plan itself. The only way to change the employer contribution level is to change employers.

There are alternatives to being in your employer's scheme, and that is to opt out and make your own pension arrangements. You would still have the tax advantages, but would (possibly) lose your employer's contribution (although some employers will contribute to private schemes).

Welcome to the real world, where you'll need to pay 25%-30% of your pay into a personal pension if you want to get a reasonable fraction of what public-sector workers get.

Many people can earn vastly more money in the private sector than in the public sector, and if you are one of them then provided you start early and save as much as you can in a private scheme, you could have a pension that matches or beats those of your former colleagues.

According to the BBC in 2012

The median average salary-linked public sector pension that is currently being paid out to a pensioner, is worth £5,600 a year.

That compares with £5,860 in the private sector, according to the National Association of Pension Funds (NAPF).

Using a mean average, some £7,800 a year is being paid in a public sector pension compared with £7,467 for a private sector salary-linked pension.

Congratulations on having the sense to start planning for your retirement while you are still reasonably young. Stay on track, and hopefully you will not end up as one of those sad f**ts that resent public sector workers drawing a decent pension that they may have paid into for 45 years.

bigadaj

Can you find some of those private sector salary linked pensions in your final quote?

Don't believe they exist anymore, it's defined contribution or nothing.