How much to offset pay to account for higher charges in private pension?

i_am_bob

Hi

For the purposes of considering a job offer, what is a quick rule of thumb for discounting higher pay for the absence of an investment-based (not final salary) company pension scheme? Specifically, for higher charges that I am likely to pay in a private scheme?

In my current job I am in a company pension scheme that matches my contributions with a multiple of that that is contributed by my employer. I believe I am paying 1% in charges. In the new job I will be paid a higher gross salary but there is no company pension scheme. So to have the same effective pension contributions and take-home pay, one thing I need to account for is covering the extra contributions myself, and contributing more to cover higher pension charges. Calculating the lack of employer contributions is easy, the higher charges less so.

I understand that there are other factors involved - most obviously the investments involved! - and I am specifically interested here in accounting just for increased charges on similar investments.

What might be a plausible increase in charges, and what is the easiest way to calculate the increased contributions required?

In this situation where I need to decide quickly whether to accept the offer without actually picking out a private pension today - taking many other factors into account in addition to pension - a simple rule of thumb would help me better than nothing, so I hope people won't be shy in giving an opinion without taking into account all of the complexities!

Thanks

PeacefulWaters

I wouldn't even factor the charges into the calculation.

1. You should be able to invest for less than a 1% charge anyway.

2. If your employer contribution is 10% of salary the current charges are 0.1% of salary. Even doubled charges with the same contribution would only be 0.2%. An extra £40 a year on a £40k salary.

Here's a DIY option to compare charges on. Not a recommendation, just an example.

Your_Hero

i_am_bob wrote: »

Hi

For the purposes of considering a job offer, what is a quick rule of thumb for discounting higher pay for the absence of an investment-based (not final salary) company pension scheme? Specifically, for higher charges that I am likely to pay in a private scheme?

What does the pension scheme you are looking at say about charges?

In the new job I will be paid a higher gross salary but there is no company pension scheme. So to have the same effective pension contributions and take-home pay, one thing I need to account for is covering the extra contributions myself, and contributing more to cover higher pension charges. Calculating the lack of employer contributions is easy, the higher charges less so.

You'll find that the new employer will have to offer a pension scheme to you sooner or later due to auto-enrolment. Ask them for a 'staging date'.

What might be a plausible increase in charges, and what is the easiest way to calculate the increased contributions required?

Research the pension providers and find out. They almost always display their charges on their websites.

xylophone

there is no company pension scheme.

https://www.gov.uk/workplace-pensions

i_am_bob

Thanks everybody, very helpful!